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

[2002 Caddy]

Wow all of these posts and only one person gets what this merger is about.. almost... OK first what this merger isn't about...

It isn't about brands, or platforms, or engineering, or cars, or trucks.

Have you all forgotten that Rick is a whanabee accountant.

This merger IS about getting rid of the ticking time bomb that is the 49% remaining of GMAC. This merger IS about getting a bigger piece of the Government bailout/free money/loan pie.

It is already clear that this merger will only give GM more dealers, more brands, more product overlap, more plants, more focus in N/A, more head offices... NONE of which GM needs or even wants right now...

Without government help this merger will help neither company. With government help (and lots more of it) It will buy GM some time and will help cerberus (if they buy up all of the bad debt in GMAC).

This looks to me to be a hail Mary play to get GM in the media in a positive way and to help hold up the stock price.

[xjug1987]

Some good points however, again, GM has more brands than it needs now. How many people would want to see "Dodge as the Pontiac we always dreamed of"? I suggest the opposite. Sure there is some technology, but consider the layoffs, the cost of shuttering plants, law suits, etc... Remember it cost GM $1B to close Oldmobile and it has perhaps 3 other brands that may eventually die. It doesn't need Dodge added to the mix. Are there plus's in this mix, perhaps, but simply doing this to fend off Toyota, and "Buy" market share, I think is death wish. If Chrysler does not have enough in its portfolio to survive on its own, why does GM want it? The Mini Van Mkt is shrinking and Honda has the best one out there. GM has Hummer and it could be Jeep if it was marketed properly. The Chrysler 300, great car that it is, is aging and once the new MB E-Class comes out, is 3rd generation technology. The new Dodge Ram is nice, and perhaps the #1 truck out there, but GM's are #2 and out sell Dodge substantially. What GM needs is $10B in cash. What Chrysler needs is $5B in cash. GM stay focused on cash generation and a CTS quality portfolio for each segment and every brand. Hello Uncle Sam and more debt for the taxpayers.

[Rick_VT]

Definately alot of pros and cons for a merger of these 2, it would have to benefit GM massively by having the Chrysler cars on GM platforms, helping pay for the development costs quicker and getting more profit per car for it, but would take a fair few years to merge them into the same cycle

I would also assume that any tie up between these 2 woudl come with conditions, for GM to take over Chrysler they would need access to money, i would think that Cerberus would be the ones who would make the money available to GM to pay for stuff.

Its in Cerberus's best interest to have cars bein sold so that they can make money on the loan side of things, once GM's new contracts kick in and they start to stop losing money, hopefully soon, they stand to make quite a bit of money i reckon if GM/Chrysler can work.

[HotCarNut]

Talk about not seeing the forest for the trees......


There are 3 big reasons that GM wants to do the deal with Cerberus for Chrysler:
1. Get rid of the GMAC liabilities related to sub-prime loans. GM is having to commit a lot of capital to keep GMAC solvent. By getting rid of the anchor, GM no longer has to keep that capital in reserve but can deploy it to the rest of its' automotive operations.
2. Gain access to GEM (now called ENVI), the world LEADER in electric vehicles. Everybody overlooks that the worldwide leader in electric automobiles sits under the Chrysler umbrella. They have over 40,000 electric vehicles on the road. Chrysler's EREV program is just as far along as GMs, if not slightly ahead. Chrysler also has an advanced partnership with GE that GM would dearly love to get involved in related to electric vehicles, batteries, and next gen components.
3. Chrysler is actually making money!!! Yes, I know that people find this hard to believe, but everything that everyone has said points to the fact that Chrysler is actually cash flowing. They've been successful at selling of excess assets. Chrysler has moved much faster to consolidate dealerships (although they've still got a long way to go). They've been infinitely better at establishing partnerships and contract manufacturing relationships with other manufacturers (See VW and the minivan, Nissan and the pickup truck, etc). Chrysler also will have one of the freshest lineups in the industry in 2010. The new Ram and Challenger have been released. Chrysler will have the new small car based on the Nissan Versa platform, the next-gen 300/Charger has been announced, the Sebring/Avenger replacement (or significant refresh) is due, the next-gen Jeep Grand Cherokee will be out, at LEAST one of the electric vehicles will be out, the Phoenix V6 will be out, the dual-clutch transmission developed with Getrag will be in production, the new 6.4L HEMI will be in the SRT products, and most of the unprofitable vehicles will be dead (Jeep Commander, Chrysler Pacifica, Dodge Magnum, Chrysler Crossfire).

In short, Chrysler has done the turnaround act faster than GM and will actually be in tremendous position in 2010. GM is still bleeding cash while Chrysler is ahead of schedule and cash positive. GM has some great products, and good things on the board, but it may not survive until 2010. At least not without a profitable division (ie- Chrysler) pumping in some cash and getting rid of the cash drain that is GMAC.

[nadepalma]

Good Rant BigAl!

As you say, there is good and bad in this.

However, the one thing that makes me guarded - and would be inevitable - would be that GMC, Pontiac, and perhaps even Saturn would have to be killed off to make room for the Chrysler brands. And even the Chrysler brand itself may have to be killed since it would directly compete with Buick. That's a lot of pain to go through and would hurt like hell.

Plus we aren't even talking about the human capital involved either.

But like you say, any kind of a merger may potentially lead to other realizations as well that could benefit both partners.

Originally Posted by 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.

I agree with this as well - it may not be possible now.

However, I wonder if this isn't to be, perhaps GM could either take a small stake out in Chrysler the way Renault-Nissan do? GM could take the 19.9% stake in Chrysler that Daimler AG owns and Cerberus could buy a 10% stake in GM for Chrysler.

Even if that wasn't possible, they could create an industrial alliance without a stake. That would allow them to pool resources and co-develop platforms or just use each other's tech. If things proceed well, they they could formally merge or take a small stake out in each other.

This may be more plausible in the short term, no?

[BigAls87Z28]

This rant was not about the economic impact of the two, but what would actually become of the two companies products since...you know...thats why they are in business.

This rant was not WHY GM would want to Chrysler, but if it happend, what are some things that could happen with the vehicles. Without the vehicles, neither will be in business.

LX and LY are substandard compared to Zeta. Zeta is ready for mass production in the revised Oshawa plant. If we are going to say that the better platform is the one for mass production, then FWD is the way to go as its easier to package, and neither Zeta, LX/Y or Sigma would be a good choice to replace a high volume line.
BUT, GM has a massive plant in Oshawa designed to build 500k units, and all it has right now is 100k of Camaro and whats left of Impala.
Zeta has been shown to outperform the LX cars time after time, and the new Camaro will seal the deal that Zeta can provide a better more flexible platform capable of several wheel base lengths and dimensions over the one size fits all LX cars.

As for company wise, GM can get rid of Ren Center, move into Auburn Hills as suggest by others on the internet, and have an HQ overnight. Ren Cent sale would give GM a little cash, and its not that big of a deal, but having Chrysler's HQ as back up means that GM spends very little to move in.

Yes, there would be massive cuts into white and blue collar work forces, but the two companies could work under the same umbrella without problems.

[2002 Caddy]

Originally Posted by BigAls87Z28

What are some things that could happen with the vehicles.

You and I both know in the short run the answer is not much, to absolutely nothing. This merger is NOT about the cars... It is about getting some working capital while you get rid of a huge sub-primie liability.

Even though this isn't what this is about What should happen to the cars?
1) Kill Saturn, Pontiac & Buick N/A, Sell Saab, Hummer. (customers are way ahead of us on this one)
2) Shut down dodge trucks (customers have this one well in hand too)
3) Sell everything that isn't nailed down (already underway)
4) Fix the broken Cadillac Division bring back a large 32V V8 flagship sedan (will never happen)
5) Focus on small QUALITY cars (only 15 years late on this one)
6) Fix our broken marketing (never happen, GM doesn't even know its broken)

Look at that list... not counting #2 it is a list of things that need to happen with or without a merger.

Cut to the chase...
1) ALL existing platforms will exist post merger
2) ALL existing brands will exist post merger
3) ALL existing problems will exist post merger

The merger will be a train wreck.

[Tstag]

Jeep catching up Land Rover would take some doing. Jeep is dying on it's feet in the UK and Land Rover's current range is very classy. They are also a long way down the line with Hybrids and Aluminium welding. TATA are ploughing the cash in left right and center and there's now talk of Mercedes Benz supplying component to JLR. Jeep by contrast is a long way behind Land Rover in all the areas that matter in Europe. Jeep's a great name but a long, long, long way away from taking premium sales off Land Rover/ Range Rover.

Dodge is not well established in Europe. The quality of their cars is rubbish and people are quickly waking up to this. I'd much rather GM sent us Pontiacs than those pieces of S**T. Chrysler has a better reputation here. The Neon was more in tune with European tastes and really another model like that (but much better) would do wonders.

All in all I think it would work if GM was flush but they aren't. GM should look to a foreign partner if possible. The need smaller cars and they more brands in other parts of the world. If for example GM tied up with PSA then they could solve an awfull lot of problems by developing joint models with Peugeot and Citroen. PSA are nowhere in the USA and brands like Pontiac and Buick nowhere in Europe. By working together they could share components and market the same cars under different brand names all over the world. A much more sensible idea!

[BigAls87Z28]

Im talking about some serious elimination of some products. Like I said, and like what Mr.DeLorenzo said, there will be blood.
GMC and Pontiac could be replaced by Dodge and Jeep.
Take the top percentage Jeep/Dodge dealers and keep them. Either merge them with local PBG dealers or let them go.
My suggestions would be a real strike to the automotive workforce for both Chrysler, GM and its dealer network.

[FStephenMasek]

GMAC may be a ticking time bomb, but if the three-headed dog wants it, I'll bet they have figured out that it will untimately be a money-maker. GM may not be able to afford to stay with GMAC until then. Otherwise, it seems that they would just kill Chrysler to get rid of a competitor. There is no Chrysler vehicle which is better than the corresponding GM vehicle, except the off-road Jeeps.

[vcs2600]

The Pontiac thing is a no-brainer.

Dodge outsells Pontiac/GMC combined
Chrysler and Dodge outsell Buick/Pontiac/GMC combined.
Throw in Jeep and it's not even close -- Chrysler Corp has twice the sales volume as BPG.

This is not "hating", it's cold hard numbers.

These brands obviously overlap greatly with one another, and when GM consolidates the weaker brands will go and the stronger ones will stay. Right now Chrysler's brands are a lot stronger than GM's second-tier brands.

[CadiEldo67]

Originally Posted by Firebird00

Because for some reason on this site, a horrible anti-Pontiac tone prevails. I guess the kill it rather than fix it avenue is just the easy gutless way out. Chevy built total garbage for just as long as Pontiac did but they escape much of the criticism. I sometimes wonder if I am even on a GM site at all when I read statements like putting Dodge in Pontiacs place. WTF?! And don't even get me started on the Challenger as Camaros sister car lol.

word

[2002 Caddy]

Originally Posted by vcs2600

The Pontiac thing is a no-brainer.

Chrysler and Dodge outsell Buick/Pontiac/GMC combined.
Throw in Jeep and it's not even close -- Chrysler Corp has twice the sales volume as BPG.

This is not "hating", it's cold hard numbers.

Yup, as I posted keep:
Chevy, Dodge, Chrysler, Cadillac and maybe GMC
Dump Saturn, Buick N/A, Pontiac, Ram Trucks and maybe GMC

If you fail to do this the merge will be a disaster.

[CadiEldo67]

Originally Posted by vcs2600

The Pontiac thing is a no-brainer.

Dodge outsells Pontiac/GMC combined
Chrysler and Dodge outsell Buick/Pontiac/GMC combined.
Throw in Jeep and it's not even close -- Chrysler Corp has twice the sales volume as BPG.

This is not "hating", it's cold hard numbers.

These brands obviously overlap greatly with one another, and when GM consolidates the weaker brands will go and the stronger ones will stay. Right now Chrysler's brands are a lot stronger than GM's second-tier brands.

GM cannot buy Dodge and fill in the gap left by Pontiac, the customer of either brand won't have it. Chevy-GMC-Pontiac are the top three. You want to kill a brand, kill Hummer, kill Saturn, sell Saab. I have said in the past to kill GMC, but it makes a good sister brand to both Pontiac and Buick. Besides, it cost next to nothing, unlike Saturn which cost billions in return for little more than the recognition, "a different kind of car company..." If they want to keep Saturn around, let it be GM's green brand, let it sell diesels and small cars and hybrids and all that fun stuff. Then it can have a trickle-up effect.

[vcs2600]

Originally Posted by CadiEldo67

You want to kill a brand, kill Hummer, kill Saturn, sell Saab.

Since this is a popular solution around here, I'll just point out that we're far beyond the point when killing these brands makes any material difference. Selling Hummer and Saab will keep GM in business for maybe an extra month or two at most.

The domestic auto market has about twice as many brands as it needs. One way or another many "old favorites" are gonna go the way of Oldsmobile and Plymouth.