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Worst Case Scenario? Toyota Buys GM

13K views 112 replies 74 participants last post by  nailhead425 
#1 · (Edited)
Worst Case Scenario? Toyota Buys GM
Beware - Paranoid Dream-Induced Ravings below:



First let me say straight off that this is not yet another article predicting the doom of General Motors. This is not something that I feel necessarily will happen or must happen to GM. Rather, it is based on past experience and conjecture of what potentially COULD happen in what for GM and Detroit fans might be considered a "Worst Case Scenario", and what - if you can stoop to the level of a conspiracy theorist for a few moments - one might consider Toyota to have been secretly planning for some time now.

Secondly, it is important to point out that I have little in the way of numbers or market research and even less knowledge of U.S. bankruptcy law to back up my theories, just a collection of observations, which I will list below. There are probably 5 counter-arguments to refute any one of my ideas, and if so, I'd love to hear them from you. In fact, I welcome all of YOUR ideas on how exactly this "Worst Case Scenario" might come to pass, and what GM might do to prevent it from happening. Also, if you are an open or a closet Toyota fan, you can tell us why it would be a great thing (not that I'm going to agree...).


Bankruptcy and financial woes make for a nice ripe target

Classic example: The GM takeover of Daewoo. GM was able to pick the company up for a fraction of what it was originally considered to be "worth", and was able to pick and choose what parts of Daewoo it wanted, and which it did not. In the theoretical world where Toyota=GM and GM=Daewoo, Toyota could decide to take Chevrolet and Cadillac, and dump much of the rest. Of course it would never be as simple as that, but the buyout of GM could easily lead to that over the course of several years. Would GM's Buick dealer contracts be any more meaningful than Daewoo's pre-buyout US dealerships that "got the shaft" so to speak? Or would a Toyota-GM merger make cutting the fat all that much easier?

Toyota not opposed to market domination

Many have made the argument of "Why would Toyota want GM?" Well, if they could pick and choose what they wanted, and eliminate or simply not buy the rest, the answer would seem simple: Market Penetration, and Market Share.

Japanese carmakers recently reached a milestone of 30 percent of U.S. auto sales. Toyota currently has 44% of the Japanese market. Toyota has been quoted as targeting 15 percent of the US auto market by 2010. What would bring Toyota to that point and beyond much more quickly? That's right, buying out one of its primary competitors.



"We'd like to be considered a 100-percent American company," Fujio Cho of the Japanese automaker's U.S. marketing strategy, 2005 (Per Detroit Free Press).

What better way to accomplish that than by taking hold of the most visible parts of GM, such as Chevrolet and Cadillac?

With the Beneficial Merger Partner image (despite initial cries of dismay) that Daimler-Chrysler currently projects, it is not impossible to imagine a similar partnering between Toyota and GM.

GM rapidly becoming an easier buyout target?

With GM's stock tanking and various debt issues, things often look bleak for the General these days.

GM's market value of $16.6 billion is now 1/8th the size of Toyota's. Toyota could "buy" GM right now, in theory, but better to bide its time and wait for darker days at GM to come.



A revitalized GM might help Toyota some day

A leaner, meaner GM, still in some level of control in regards to making US market and some world cars could, ironically, be a savior to Toyota some day. One look at Mercedes Benz, which is now leaning on Chrysler in ways that few people would have predicted when Chrysler was "merged" into DCX would seem to be a good example. GM Daewoo's resurgence as a maker of small cars for GM worldwide might be another good example of strength in a post takeover automaker.



NUMMI, Nova, Prizm, Vibe Pave the Way

I keep asking myself, "What is GM getting out of the anachronism that is NUMMI these days? A single Toyota-engineered car, the Vibe, to sell at Pontiac dealerships? Surely that can't be it."

There was a time when NUMMI made much more sense. Well, the idea did, even if the Toyota-engineered Chevrolet Nova is a little-loved car by GM fans today. And the idea was simple. Back when GM had a 45% share of the US market, Toyota didn't seem like a serious competitor, but it did have some serious ideas about manufacturing. In fact, some thought at the time that GM could only stand to further dominate the market after learning what NUMMI had to teach about "Lean Production", and what many now call the "Toyota Way". But those lessons were learned - or should have been learned - 20 some-odd years ago. So what does GM have to gain from NUMMI right now except how to place a Pontiac badge on a restyled Corolla wagon?

Let me put on my tin-foil hat and tell you that while GM sees itself as gaining a nice little Vibe from the deal, Toyota actually has more to gain from NUMMI than GM at this point. On the surface it would seem not to be so, given the short life-span of the NUMMI builtToyota Voltz, a virtual Vibe clone, almost down to the badging. But my crazy theory is, with continued connections like this to GM, it makes it easier for Toyota to be accepted some day as the takeover benefactor of GM in its time of financial woe.



Detroit and Michigan wait Eagerly with Open Arms?

Detroit is the center of Automotive Industry in the United States and naturally committed to throwing their support behind historically Detroit-based companies like GM and Ford over all others in a mutually beneficial symbiotic relationship, right? Well, Governor Granholm and many in Michigan sure don't seem to think so.

With Detroit's automakers struggling to make money and shedding jobs, Granholm wants to preserve and enhance Michigan's economic ties to the global car industry by attracting any and all automotive investment.
"We're not playing favorites," she said. "We want to favor job-providers across the board. In a global economy, that means international investment but it also means supporting those who bring us to the dance, as we say, which are the domestic Big Three." March 27, 2005 - The Detroit News
Which means, no favorites, no giving back to GM any more than Toyota. Door stands wide open. "Come on in, Toyota, we're ready."

And given the way GM is squeezing its suppliers for more price cuts, it isn't hard to see why there might be an almost hostile attitude towards The General in the industry and in the state of Michigan.



Deploy Golden Parachutes!

Having worked for a large corporation that sold itself out to a competitor perceived to be a smaller player in our main business, I have seen the way corporate leaders in the United States can work. Just give them a nice enough package, write a few speeches for them to give that console the die-hard fans, and off they go to their next endeavor, leaving the detritus of their old company behind them to be gobbled up by the buyer while they sip mixed drinks in their corporate jets and chuckle about the inevitability of it all.

Still a Wild-eyed Conspiracy or Baseless Conjecture?

Perhaps there is nothing to my "Toyota secretly plans to take over GM" idea. Perhaps Toyota would be more satisfied taking the rest of the automotive world on, chipping away market share, bit by bit over a span of decades. But it sure seems that if Toyota wants it, market domination and massive market share is only a buyout away.

Finally, "What's so bad - so 'worst case' about this scenario?", some of the milder GM fans and Toyota fans might ask. It would mean the loss of another America based industrial icon to the global (yet in this case Japan-headquartered) economy. It would mean pride in GM's Detroit-based engineering prowess would become a thing for history books, or still alive in some sense, but heavily diluted by Toyota engineering. It would mean a "win" for Toyota, and GM defeated.

But enough of the doom and gloom. Tomorrow is a new day for GM, and a new chance to make a miraculous comeback and stun the automotive industry. Let's get behind GM and help make that happen...and dump my conspiracy theories into the waste bin of yesterday.

 
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#4 ·
pic18 said:
I couldn't even read this whole article, because it disgusts me. I often wonder if this is a GM fan site or not.
I'm sorry to hear that. Please don't confuse my wild paranoid delusions with what I WANT to see happen. If my post count doesn't prove my obsession with all things GM, I don't know what will. :)
 
#6 · (Edited)
dindak said:
Stupid stuff. No one will ever touch GM anyway. Too many problems labor, benefit and capacity issues to sort out.
I'm interested (or should I say concerned) in the parallels between labor problems, bankruptcy, and the way GM took over Daewoo and dealt with them, while cutting some factories out of the deal. Not sure if that would be do able here in the US, though.
 
#7 ·
1BadPig said:
It doesn't make sense... it's like GM going after FIAT a few years ago and see how it turned out.
It's a little different than that.
Fiat was...well....Fiat. GM is still the worlds largest auto manufacturer. There's a big difference there.

It's not too far fetched really. After yesterday's slide, GM's 'worth' is only $15billion. The most likely reason they wouldn't is the UAW and all of the legacy costs that GM has. There's a lot of burden that would need to be dealt with.
 
#8 ·
GM is a big headache, Toyota would never want to have to handle the crap that is GM Managment. Toyota is not even nearly as big as GM, yet has enough money to buy GM outright right now, in cash.
And I could imagine the press going off any problems in a future Camry saying that "I guess this is what you get from buying GM."

This would be a worst case for Toyota, not GM. If Toyota's CEO got so power hungry that they wanted near 50% market share of the world, then I can see it.
 
#11 ·
pic18 said:
I couldn't even read this whole article, because it disgusts me. I often wonder if this is a GM fan site or not.
The name itself should give you an indication of what the site is about--news.

I have been a long time reader of the GMI site because of its thought provoking and interesting articles. Only recently did I join with the intent to provide my thoughts and ideas. Most of the posters on this site seem to be a great group of people who bounce ideas off of each other and spread any knowledge they have. Granted, not everyone will agree with what is posted, but the idea is to put out what is in you mind and to banter back and forth.

I commend the makers of this site for the work they put in and for providing a place to garner current news and events that affect the GM world. I have amassed a great deal of knowledge by just reading--that is the intent of the site, right?


Back to the article...
While I would not like to see this scenario play out, it is not completely out of the question. With the rash of mergers and buyouts, household name companies are disappearing fast. The idea is to eliminate the competion and assume the customers.
Lets hope that the "sleeping, lumbering giant" that is GM, will wake up and "fight" back.
 
#16 ·
When I first read the title, my first thought was "the worst case scenario would be for GM to declare bankruptcy and close". This would put thousands of people out of work. Should the world's largest automaker close its doors, the impact would be felt globally, causing economic hardships around the globe.

However, as I read on, excellent points were made, most notably where Toyota would keep only specific divisions. This is exactly the same thing that GM did to Daewoo, and ex-Daewoo dealerships weren't happy out it.

Of course, Toyota wouldn't buy GM without first breaking the union. Toyota is surely smart enough not to saddle itself with $1000 premiums for every car/truck sold just to support the UAW (they would rather keep the $1000 for themselves). Then Toyota could freely manufacture Toyota Envoys, Toyota STS', and God help us all, a Toyota Corvette.

In the end, I believe Toyota's (hypothetical) purchase of GM would only be perceived as "worst case" by die-hard GM fans.
 
#17 ·
The entire concept is flawed. Toyota has expanded wildly over the past decade or so by growing from within. In the past 40 years, the only major purchases Toyota has made was to acquire half-interests in Hino and Daihatsu, primarily by Japanese government directive. GM offers nothing that Toyota would want.

The market share that GM would offer comes at a very high cost. GM owns tens of BILLIONS of dollars to various creditors including its own pension funds. The legacy costs of decades of UAW contracts is not something that Toyota would care to put on its books. And GM's own brand names, probably among its best assests, carry far too much baggage of their own.

IF (a huge "if") GM were to collapse into bankruptcy, Toyota might pick at its engineering, powertrain, financial, or R&D groups. There's no way that Toyota would seriously consider one of GM's domestic brands, any of its North American or Western European assembly plants, or, least of all, the company as a whole.

Comparing this to GM picking at the scraps left by the Daewoo collapse is also flawed. Daewoo offered low-cost products and engineering, entry into a closed market, and low-cost labor. Toyota already has lower-cost products and probably lower-cost engineering. Toyota's already a very significant player in every market that GM plays (with the sole exception of South Korea). And the GM has used TOYOTA as the basis for lowering its costs in assembly. And Toyota has traditionally grown from within while GM's method has always been to purchase other companies (that's how it was founded), which is why GM looked at Daewoo (and Saab and Fiat and Opel and Vauxhall and Chevrolet and...). So how does this compare to the creation of GM DAT?

It just doesn't make business sense. It's not the "Toyota way."
 
#21 ·
I agree that there is no way Toyota would ever buy GM. Toyota has a long term view of things and are quite content to bide their time and wait for their marketshare to continue to grow. GM has waaaay to much baggage to deal with. The instant extra market share would not be worth the aggrevation, when so far everything indicates they will keep on growing on their own.
 
#23 ·
I don't think people understand mergers/acquisitions if you think that simply multiplying shares outstanding by current share price equates to the acquisition cost. It's merely a reference point. It's a little more complicated than that. And when one looks through all that is GM, as others have mentioned, buying GM at $16 billion would represent a significant premium. Hence, no suitors have stepped forward. Similar things could be said about Ford.

As others have correctly point out, Toyota has expanded with nary a single major acquisition - and that makes sense. I think Toyota will continue to pass on this opportunity, and I don't think it has even contemplated acquiring GM.

And it wouldn't be a worse-case scenario, by the by, if Toyota acquired GM.
 
#24 · (Edited)
If this happens I will freak out, I mean FREAK OUT!

I must say that the chances of this happening are slim to none:

1) GM is the world's largest auto manufacturer, that is a mighty ship to sink.

2) Being the world's largest auto manufacturer, they have large equity.

3) With such large equity, lenders have no problems extending loans over 20-30 year time frames.

With those aforementioned creditability's, it seems nearly impossible to bankrupt GM. Unless of course they want this to happen? Stranger things have happened - which scares me.


In an earlier post in this thread someone stated that GM pays $1000 in premiums per vehicle produced - it is actually $1800. That sure makes it tough to bring in profits hey?
 
#25 ·
Hmmm, looks like GMI is becoming a GM version of BlueOvalNews.

GM stock these days is so cheap somebody must surely be tempted. That said, anyone waiting for even darker days at GM will be waiting a long time, because GM is in better shape than it appears to people.
 
#26 ·
GM could only dream that it would be purchased by Toyota.

There is no other alternative available to GM, you see, to enhance its reputation. The 1980's and 1990's and 2000's legacy of GM has doomed it.

GM only dreams Toyota would rescue it by throwing money at it.

Unfortunately for GM, Toyota isn't going to make the FIAT mistake and risk soiling itself by purchasing a company with such a horrid reputation for product development, styling, and that big ball and chain - recalls and healthcare for its former overpaid and retired workforce.

Toyota would be best served to allow GM to go into bankruptcy where Toyota could acquire the Corvette name and rights and maybe, if Toyota wants to resurrect the Cadillac nameplate, it could invest money for a design staff with operational eyes and an interior design staff that isn't employed at K-Mart for their day job.

There isn't anything for Toyota to gain by buying GM. The nameplates of record are tossed to the wasteheap of history faster than a Clinton intern. Those left like Monte Carlo and Impala are mere shadows of their best years and GTO now hops down the road instead of eating it.

Worst case scenario? Nope. It is the best case for GM to survive. Unfortunately no one is that stupid to waste money on a ship that is going down. It is best to pick through the wreckage and let the mass of worthlessness remain deeply buried.
 
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