GM Inside News Forum banner
1 - 20 of 90 Posts

·
Super Moderator
Joined
·
10,947 Posts
Discussion Starter · #1 ·
SOURCE: Detroit News

One plan: GM may absorb Chrysler
Possible scenario would eliminate rival, reduce excess capacity; pact similar to AMC purchase.

David Shepardson, Christine Tierney and Alisa Priddle / The Detroit News
Thursday, October 16, 2008

General Motors Corp. could swallow Chrysler LLC and end the Auburn Hills automaker's 83-year existence under one scenario being discussed by GM and Chrysler's owner, Cerberus Capital Management LP, said a source briefed on the talks.

Such a deal, similar to Chrysler's 1987 acquisition of American Motors Corp., would allow GM to pick up some of Chrysler's 2.7 million in annual sales -- while avoiding the bulk of Chrysler's costs, the source said.

GM, Cerberus and Chrysler all declined to comment.

Sources familiar with the negotiations say the talks still are in early stages, and many combinations are being considered.

Analysts say a deal along the lines of Chrysler's purchase of AMC, which eliminated Detroit's No. 4 automaker as an entity and all its brands except Jeep, would make sense for GM.

Such a deal would differ from the 1998 acquisition of Chrysler by Germany's Daimler-Benz AG, which left the U.S. carmaker operating intact as a separate division. Instead, Chrysler would be completely absorbed into GM and melded into its car making and other operations over time.

"That would be the likely scenario, if such a thing were to happen," said Aaron Bragman, an analyst at Global Insight.

Besides the Jeep brand and Chrysler's minivans, the company has few assets of value to its bigger rival, he said.

"For GM, the only reason to absorb Chrysler would be to eliminate a competitor," he said.

Many industry experts believe GM's interest in Chrysler, both now and in 2007, when DaimlerChrysler AG put the American unit up for sale, reflected its goal to reduce the excess capacity in the U.S. auto industry that has hurt all of Detroit's carmakers.

"The others (automakers) will be delighted to have Chrysler just die and take 1.5 million units out of the industry, which is about what the excess is," said Gerald Meyers, former chairman of AMC and now a professor at the University of Michigan.

Such a deal would surely worsen Michigan's economic woes, eliminating thousands more auto jobs in Metro Detroit, canceling contracts with suppliers and prompting more plant closures.

The source familiar with the negotiations told The Detroit News that GM could cut costs by eliminating much of Chrysler's staff and gradually shifting production of Chrysler vehicles to use more GM components.

Lincoln Merrihew, an analyst with TNS Automotive in Boston, said he didn't see the Dodge or Chrysler brands surviving if such a deal were concluded. "In the situation the Big Three face, you're looking for hard-core, quick economies of scale," he said.

At Chrysler's Auburn Hills headquarters, morale is bleak as employees fear huge job losses in any GM deal, while the top bosses installed by Cerberus are expected to leave with fortunes.

GM, struggling with huge losses and a liquidity squeeze, might use Chrysler's cash -- $11.7 billion at the end of June -- to close Chrysler dealers and some of its businesses, as well as shore up GM's finances, analysts say.

Sources close to the negotiations say Chrysler might survive -- or at least fare better -- in a three-way deal with the Renault-Nissan alliance.

But it is unclear whether the French-Japanese partnership still is interested in Chrysler.

Renault SA is in debt, and executives are studying whether Nissan Motor Co. has enough cash to comfortably afford a deal in this difficult economic environment.

Carlos Ghosn, the CEO of Renault and Nissan, is said to have been more inclined to do a deal with Cerberus a few months ago.

At GM, many top executives support acquiring Chrysler, but only in a deal like Chrysler's acquisition of AMC from Renault.

Renault agreed in 1987 to sell its 46.1 percent stake in AMC, and AMC's board sold the remainder to Chrysler in a $1.2 billion deal, the biggest merger in the U.S. auto industry at the time. Chrysler ended all of AMC's car lines, keeping only the Jeep brand.
MORE HERE
 

·
Registered
Joined
·
1,251 Posts
This is the first thing I thought of when this "merger" was revealed. GM should have done this the first time Chrysler was going down in the early 80s.

Buy it up and shut it down. Take the technology and get rid of everything else.
 

·
Banned
Joined
·
6,540 Posts
This is a sad day - I so loathe Lutz and Wagoner for what they've done to GM and now they'll destroy Chrysler - a company that has built great vehicles over the years. Now I see that the idiot who has overseen Cadillac and given it the putridity of its design is moving to Hummer - at first I thought this was as punishment - now I see it as a chess piece that allows Hummer to survive but replace all of its Lutz/Wagoner era garbage with Jeep.

There is absolutely no chance I'll ever own a GM product of any era if GM destroys Chrysler. I hope GM finds this the pill that will kill it too. I'm over improving GM.
 

·
Registered
Joined
·
13,043 Posts
This is so stupid. Between all the plant closings and dealer wars, this would be a disaster.

If GM went through with this, here's my quick and dirty integration plan:

1) Combine everything into Chrysler-Dodge-Jeep dealers.

2) Give Chrysler a combination of home-grown and GM re-skins. Take some Chrysler designs to GM brands.

3) Let Chrysler dealers sink or swim with the integrated product line. If they fail, they fail.
 

·
Registered
Joined
·
986 Posts
This is like swallowing hot sauce for heartburn.

The article-as most Detroit News and Free Press articles are- is wrong in regards to GM wanting to take out industry capacity on their own. How would that benefit the entire industry? The market dictates if capacity is taken out or not. Why would GM want to spend the billions of dollars of cash Chrysler has on hand just to close plants, pay off dealers, be sued by dealers, and buy out employees? What benefit would GM have in absorbing even more legacy costs?
 

·
Registered
Joined
·
2,823 Posts
this is a great move Chrysler was just gonna disappear anyway when GM acquires them they will cut the fat. Keep only what is needed and get rid of excess!
 

·
Registered
Joined
·
1,774 Posts
Being Pontiac has the G8 now the Charger should be restyled/repowered and sold as a new Chevy Impala. As said above Buick could get a reworked 300 while using the Chrysler HEMI V8 as a unique Buick car only power plant. The Challenger could go to Pontiac restyled and repowered as a new GTO. Let Jeep and Hummer be combined with jeep being the less expensive of the two with an all hybrid Hummer offering more luxury. Let Dodge trucks become unique HEMI powered GMC's and the minivans go to Chevy and Saturn.
 

·
Premium Member
Joined
·
3,040 Posts
If the idea is to take the cash, that might work. But get rid of their brands to eliminate competition? If I was a big Chrysler fan or Dodge fan and GM bought and eliminated my favorite vehicles and kicked most of the employees out on the street I don't think I'd be real inclined to ever buy a GM vehicle again. It would really make GM look bad. If Cerebus splits it up and GM buys parts of it then it will make Cerebus look bad rather than GM. Hard to say how this will go over with customers. They may just be driven to Ford, Toyota, etc.
 

·
Premium Member
Joined
·
3,040 Posts
Being Pontiac has the G8 now the Charger should be restyled/repowered and sold as a new Chevy Impala. As said above Buick could get a reworked 300 while using the Chrysler HEMI V8 as a unique Buick car only power plant. The Challenger could go to Pontiac restyled and repowered as a new GTO. Let Jeep and Hummer be combined with jeep being the less expensive of the two with an all hybrid Hummer offering more luxury. Let Dodge trucks become unique HEMI powered GMC's and the minivans go to Chevy and Saturn.
If they aren't willing to make Chevrolet and Buick RWD vehicles currently with their own in house platform, why would they re-do the Chrysler/Dodge vehicles either? Doesn't make sense.
 

·
Registered
Joined
·
322 Posts
1.Minivans become Chevys
2.300 becomes a Buick
3.Charger and Challenger move to Pontiac
4. Jeep takes Hummer place and goes on a diet.
5 Dodge trucks become GMCs

Everything else gets cut
Filling out the product lines of GM brands sounds great, but what would you do with the thousands of existing CJD dealers?

Pay them to close? Easily a $2BB tab if Olds is anything to go by.
 

·
Premium Member
Joined
·
8,886 Posts
I wonder if some of those Chryslers would sell better as GM products. GM has an overall better reputation so a Charger redone in Impala clothing might actually sell better -- along with a much better interior.

No matter what, next year at this time there won't be a Chrysler as we know it.
 

·
Premium Member
Joined
·
8,886 Posts
Filling out the product lines of GM brands sounds great, but what would you do with the thousands of existing CJD dealers?

Pay them to close? Easily a $2BB tab if Olds is anything to go by.
If they "sell" Chrysler to GM via an asset sale, which is akin to bankruptcy, then dealers and suppliers are left hanging. GM won't have to pay them a dime.
 

·
Registered
Joined
·
190 Posts
A few small tweaks on what others have already said; I think the Jeep brand is very valuable, but there are some other parts in there as well.

1) Keep Jeep, in place of Hummer (keep current Jeep dealers as well probably - they can actually sell)
2) Charger to Chevrolet (Pontiac has the G8)
3) 300 to Buick ? Maybe w/ a new front fascia.
4) I think the Dodge Ram has huge potential, but I can't see keeping the brand around for one vehicle. If it did stick around, they need to advertise the snot out of it using GM / Allison transmissions. I know more than a few guys that refuse to buy dodge trucks for that one reason alone. DO NOT Replace GMC trucks w/ the Ram though - I like the GMCs as they are right now. The other small issue here, the Nissan Titan is going to be based on the new Ram - is there a contractual requirement in there that makes it difficult to stop producing/selling the Ram?
5) Minivans to Chevrolet & Buick/Saturn(?). As w/ the Ram being sold as a Nissan as well, VW has dibs on these to. Discontinuing them could cause some other contractual issues. Keeping them around continues a new-to-GM relationship w/ another manufacturer.
 

·
Registered
Joined
·
1,774 Posts
If they aren't willing to make Chevrolet and Buick RWD vehicles currently with their own in house platform, why would they re-do the Chrysler/Dodge vehicles either? Doesn't make sense.
They (the now Chrysler products) exist already for one thing. And todays Impala is getting to be GM's oldest model. It needs replacing soon and with the existing Charger/300 they could quickly do it. And Buick could get a version of it allowing Cadillac in turn the $$$ to do a blended ZETA/SIGMA and make a large MUCH NEEDED new STS replacement. Between existing Chrysler platforms and factories GM could more easily and cheaply fill out their lineup of models sooner. They would gain minivans also and a GTOesq large coupe for Pontiac. This could save GM millions in development costs for new needed models and give them the $$$ they need for ALPHA/SIGMA along with more factory space.----This could work!!!
 

·
Registered
Joined
·
1,770 Posts
Being Pontiac has the G8 now the Charger should be restyled/repowered and sold as a new Chevy Impala. As said above Buick could get a reworked 300 while using the Chrysler HEMI V8 as a unique Buick car only power plant. The Challenger could go to Pontiac restyled and repowered as a new GTO. Let Jeep and Hummer be combined with jeep being the less expensive of the two with an all hybrid Hummer offering more luxury. Let Dodge trucks become unique HEMI powered GMC's and the minivans go to Chevy and Saturn.
This is all wrong - not you or your post, but this entire situation.

G8 should go to Chevy as a Malibu while the Solstice also goes to Chevy. Pontiac should then go away.

Cost savings of eliminating Pontiac makes far more sense than an unpredictable acquisition of *more* brands that are not doing very well.

Besides, eliminating Pontiac and realizing cost savings would be seen much quicker than a best-case-scenario acquisition.
 
1 - 20 of 90 Posts
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Top