Merger, Who Is It Good For? A Big Al Rant

[BigAls87Z28]

Merger, Who Is It Good For? A Big Al Rant
www.gminsidenews.com
October 12, 2008
By: Big Al
bigal@gminsidenews.com

What a rush the past few weeks have been. Stock market crashing, credit market crumbling, banks failing, people losing tons of faith in banking institutions as well as the government. With a presidential race as a proverbial icing on the cake, the news is jammed with story after story of eye catching headlines. But yesterday, we all saw the one big headlight that seemed to escape regular media. GM is looking to pick up Chrysler in a merger. This sent shock waves across the automotive landscape with everyone's first reaction was "What does GM want with Chrysler?"

Well, we can look at the financial end and see that with GM burning through cash, that this would be a silly move for them. With Chrysler's lack of quality in recent years, again this is another questionable move. But lets look into this. GM wanted to buy Chrysler over a year ago...but why? Just to have more brands? Market domination? What would this really mean? What could happen in this merger? And the final question, is this going to make GM stronger?

I asked myself these questions and tried to really come up with an idea of what is going on with this. After many dead ends, much deep thinking, I came to the realization that this could be the best or the worst thing to happen to GM. Now, we all know what the worst case situation would be, failure of two American automotive brands and the loss of tons of jobs, a huge problem right now in this economy. They would be bankrupt, stripped down, parts sold off to the highest bidder. Gone would be history, memories, dreams of what has gone and what will come.

Lets take a look at the other scenario. The best thing that could ever happen to GM. The obvious good things would be this would easily place GM as the #1 auto maker in the world by far, putting Toyota's dreams out with one massive sweep. It also gives GM tremendous access to engineering and development world wide. Semi-German engineering programs that are probably still on the books, tie ins and other ideas could help improve this new GM program. People scream that there would be too much overlap, too much cannibalizing of each other sales. I say bull.

We are not talking about developing a new company, starting a new division, creating a new idea, we have a preexisting infrastructure that has been in place for many years. That doesn't mean that Ram's will be powered by Vortec engines, or Hemi Powered Camaros. Chrysler could retain its identity, without having to merge powertrains too much. Transmissions, that would most likely be a different story as other running gear would most likely switch over to the much more reliable GM units. Other powertrains such as the Ecotecs verus the Chrysler World Engines would be a big battle, but with Ecotecs being GM's baby, and the likeliness that Chrysler cars would be on GM platforms, Ecotecs would win out.

Going on to platforms, GM could shut down most of Chrysler's plants and shift production of Chrysler vehicles into GM's plants, increasing production. This is a double winner as GM keeps capacity high, and they will most likely need more workers so some that might be let got in the merger could be rehired and put to work in GM factories. This would mean that less plants making more cars, which is what GM wants to do. Chrysler could throw away any "Project D" plans they currently have and start to design Sebring and Avenger replacements on Epsilon. GM could also use its amazing depth in platforms to bring to market such cars like the Hornet concept on a Gamma platform giving Dodge a fun to drive compact. Combining Chrysler's designs with GM's designs and their world class platforms, we are talking about a massive turn around for American cars. We are also talking about the return of Zeta!! Yes, ladies and gents, LX and LY development could be thrown away and Zeta II SWB and LWB could bring Holden some new jobs as well as fill up the Oshawa plant easily! Gone would be the old MB derived platform and in would be the all new Zeta II program to the US! Hodlen fans and employees rejoice! You could be hoping for this! This also means that Challenger replaces the Firebird as Camaro's sister car. Yes Pony Car fans, the Challenger and Camaro could possibly be built on the same platform, sharing a lot of parts, and being able to turn the Challenger into a better pony car, or perhaps it could be a GTO replacement? A larger, more luxurious coupe could fill in that hole left by GTO and Monte Carlo. Dodge would in turn become the Pontiac we dreamed of.

And that gets into the greatest part of this merger, globalization. Dodge has, while minimal, a world image. That is something that Pontiac does not have, nor GMC. Dodge gives GM another division in China and Europe as well as a full line company for the US. Dodge could replace Pontiac AND GMC in current showrooms giving both performance vehicles and rugged trucks. Therefor GM gets Dodge's image and their brand loyal people into GM showrooms and introduce them into the GM culture. Jeep also gives GM the chance to fight Land Rover and do it RIGHT! My original idea to save GMC was to turn it into a luxury off road brand like Land Rover all the way to a fun off road company like Jeep. With Jeep a part of GM, the Jeep brand can now truly fight Land Rover on several levels WORLD WIDE! No problem trying to establish a GMC system around the world, the JEEP has been known world wide since World War 2! That is 60+ years of image, marketing, and desire for their vehicles that GM could never get with GMC. I have always had a theory that everyone, at some point in their life, will want to own a Jeep Wrangler. That image is what made Chrysler so desirable before, and now GM is surely going to capitalize upon this. But this brings up a problem that has plagued GM since the 80's.

GM has yet to show that they can market a brand successfully. Sorry folks, they really cannot do it. I have done a better job at marketing for GM then GM has. But this is where GM can win big. Chrysler has, by far, some of the best ads and ideas for marketing out there. They always have been very edgy and have had very awesome marketing programs, developed great commercials, and really pushed their brands back into the minds of America. Problem is Chrysler has had semi-poor quality cars, where GM has the opposite. Great cars, poor marketing. GM can now take Chrysler's marketing team and use them to make their great cars stand out. This could be the best way for GM to not only boost its own divisions, but Chrysler's revamped line up.

The only problem with all this is that it wont happen over night. As said in the other article, it would be a product cycle or 5-6 years till we saw this happen. This could be one of the best things GM has done in a long time. GM obviously sees a reason to merge with Chrysler enough that they were in talks twice. GM needs to move quickly and capitalized on this situation, move GMAC off to Cerberus and move forward on making cars. This could do great things for GM, and it could really push GM back into some serious market share numbers. There will blood, no doubt about it. Dealers were suffer, union workers will be out of work, and there will be a blood letting that will try to turn GM into a leaner fighting machine. This really could be one of the best things to happen to GM. Let us just hope they have the same optimism I have.

Thank You For Your Time

Big Al

[MadTruckMan]

great article bigal. the only real reasons i see GM even wanting this deal is market share, jeep brand, and minivans. everything else in the chrysler catalog is expendable. granted, this will cost thousands of jobs on the chrysler side of things, but thats business. it will be interesting to see what GM gets out of their share of GMAC with the housing bailout not even yet to take effect. dumping all those bad mortgages off on the gov't would make GMAC worth a lot more than they are today, so i'm sure that is gonna be factoring into any deal. anyway, great article, and keep up the good work!

[Buick61]

I agree about the Wrangler. Though, I disagree with the idea of "throwing away" Chrysler's LX cars. Chrysler has done more with RWD than GM has this decade, so I'd say the LY would take the place of the so-far-unpopular (in the U.S.) "zeta" or global rear-wheel drive architecture.

You seem to push a lot of negative views of Chrysler along as fact, though, which is troubling. However, I think you may be giving Chrysler's marketing a touch too much credit. They haven't done anything that's resonated with the public since the "That Thing Gotta Hemi?" campaign of 4 years ago.

Both companies have HUGE issues, to be sure, but perhaps you maybe onto something. There's nothing wrong with Buick that a little Chrysler 300C can't fix. And there's nothing wrong with the Cloud Cars that a little Epsilon can't solve. However, GM can't manage the brands they have now. Adding three more isn't going to cure their problems.

[stormwatcher]

At a different time, I could see GM taking over Chrysler but I don't see how GM can do it now. It would not stop GM from losing cash, and that is of critical concern to GM right now.

More platforms, more brands, more UAW. It's too much stuff with lots of downside.

[BigAls87Z28]

So far unpopular compared to what? The G8's sales numbers cannot be the basis of any comparision. If the G8 sold at max capacity, it wouldnt sell more then 30k units here in the US, thats not even half of LX cars sales.
The Zeta platform itself is a better and much more flexible platform then LX is as is Sigma.
Wrap the new Charger or 300's body around it, and we are talking about some hot sellers for both of them. Not ot mention a propper platform for Challenger.

[Stéphane Dumas]

Good rant BigAl

However, will some folks at key positions at Chrysler like Jim Press, Ralph Gilles will stay at GM?

[CamaroCrazy]

^^ I thought about that. Merge and add Jim and Ralph, and Tom LaSorda, to GM's ranks. Tell Nardelli to take a hike, without a golden parachute. I wonder if Jason Vines is still looking for a job.

Good points BigAl. I still think its a long shot that it will happen, but I've been wrong before.

[danwaterloo]

I assume a big part of the rationale for this is the government will lend to a combination of GM/Chrysler to save both from bankruptcy. Chrysler is likely not going to survive by itself, no matter the size of a government bailout. GM just needs to get through to 2010, after which it will survive and thrive because of the quality of its products. If GM takes over Chrysler, it can save it by improving its quality, which means the government won't have to deal with a very messy bankruptcy. But the only way the combination will survive is with a big bailout and a lot of restructuring. If GM/Chrysler gets a bailout and executes the restructuring properly (a lot of layoffs, dealership consolidations, and brand killings), it will thrive in a couple years.

This can make sense but only with a bailout and heaps of restructuring. Otherwise it will drive both companies to rapid bankruptcy.

[FoMoCo Fan]

One thing I haven't hear anyone mention is CAFE. Unless this deal helps GM with CAFE (and I think it would actually hurt them) I can't see it happening.

[Buick61]

Originally Posted by BigAls87Z28

So far unpopular compared to what? The G8's sales numbers cannot be the basis of any comparision. If the G8 sold at max capacity, it wouldnt sell more then 30k units here in the US, thats not even half of LX cars sales.
The Zeta platform itself is a better and much more flexible platform then LX is as is Sigma.
Wrap the new Charger or 300's body around it, and we are talking about some hot sellers for both of them. Not ot mention a propper platform for Challenger.

We're not talking about better car, per se. We're talking about outright survivability in the marketplace The LX cars have a far wider appeal than any RWD GM car of this decade, and it would be foolish of them to cast it aside. The amount of marketing money it would cost for GM to achieve the same amount of consumer awareness that the 300/300C and Charger enjoy would just not work in this current climate.

This merger, were it to happen, is for corporate survival. They just don't have the funds to do anything but keep the plant's lights on for cars that are already on the books and are already profitable. Even if we're talking about the next product cycle, GM would be wise to capitalize on the LX/LC's success and give Buick a real car, for once, in the same vein as the 300C. Pontiac wishes it had the Challenger. GM can't start from scratch with zeta and do better than what Chrysler has achieved with LX.

[GG_TECH]

The merger with Chrysler and gang with GM doesn't bring much to GM. GM will be inheriting a defunked company. Chrysler may offer Dodge trucks but that segment of the market is shrinking. Know wonder Daimer Benz didn’t keep them. Since the current owner a private equity firm is loosing quite a bit from the investment, they’re trying to find a way to dump them. I have my doubts that the deal will go through unless Chrysler sells it for a substantial discount. I do not see any major benifits for GM in this deal.

[jbartley]

if this merger happens all i want is "minimum" Bob Nardelli to be sent packing. that guy destroys everything he touches.

[gmwsag]

Even with 35% stake in the American market with such a merger, market share is not the end game. It's just breaking even and getting back into the green for simply one year. And to think that all of this mess is as a result of bad management during the 70s, 80s, 90s, and early 2000s: big investments into faux import-competitors Saturn and GEO, body cladding, platform sharing, Aztecs, picking up SAAB and HUMMER, and running the Pontiac and Buick nameplates into the ground.

It's just a big headache neither the government nor any sane person in their right mind would want to handle! I am so fed up with defending General Motors and the American industry and hoping for a total revitalization and comeback. It's NOT the fault of the transitioning market nor the American economy. It's directly the fault of the ridiculous people at GM.

I'm not afraid to say that the next car I will be buying will definitely be from a foreign competitor.

[t-rex]

Great writeup, als! You brought to light some positive aspects that I hadn't considered before.

Again, aside from Jeep and minivans, I can't see anything at Chrysler worth buying, and nobody is going to pony up the dough to buy the entire company just to get Jeep, unless Cerberus is willing to fob the whole company off for the value of the Jeep name (like AMC did!).

I have to disagree with Buick61 regarding the LY platform. It's a modification of the old W124 Benz platform, now used by SsangYong, and is, believe it or not, even older than the GM W-body platform. It's well beyond its sell-by date, despite being basically a good platform. What's acceptable today won't be in five years' time, making Zeta the obvious choice for a large RWD platform.

Maybe GM could simply keep the two companies operating as separate entities, much like Renault and Nissan do, sharing all the hidden parts, sharing development costs, and utilising global production to both company's advantages (Renault's strength in South America has helped Nissan, and Nissan's strength in Asia is helping Renault). This would make more sense than trying to fold Chrysler as it exists into GM's titanic corporate structure.

[mikesright]

Originally Posted by Buick61

We're not talking about better car, per se. We're talking about outright survivability in the marketplace The LX cars have a far wider appeal than any RWD GM car of this decade, and it would be foolish of them to cast it aside. The amount of marketing money it would cost for GM to achieve the same amount of consumer awareness that the 300/300C and Charger enjoy would just not work in this current climate.

This merger, were it to happen, is for corporate survival. They just don't have the funds to do anything but keep the plant's lights on for cars that are already on the books and are already profitable. Even if we're talking about the next product cycle, GM would be wise to capitalize on the LX/LC's success and give Buick a real car, for once, in the same vein as the 300C. Pontiac wishes it had the Challenger. GM can't start from scratch with zeta and do better than what Chrysler has achieved with LX.

I disagree that GM could not make Zeta work for more volume than the Chrysler LX cars. Zeta is lighter weight and has better handling characteristics, just to start. Zeta is also far more flexible than LX, as you can see in the dramatic differences between G8 and Camaro, vs the Challenger/Charger variants. The only thing that was ever missing was the commitment by GM to produce a line of models to take advantage of the platform.

However, GM would likely keep the LX/LY cars as the R&D money has already been spent on the replacements and upgrades in tooling for those cars, and GM would likely keep the cars on that platform as long as it is viable. LY is also a point of differentiation for Chrysler's brands, so I would not see it going anytime soon in a merger. This is going to take 10+ years to integrate Chrysler into the product plans at GM, if not more.