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SOURCE: AutoNews.com

Options scarce if GM-Chrysler merger talks fail
Automotive News | October 22, 2008 - 8:15 pm EST

DETROIT (Reuters) -- As General Motors pushes ahead with talks to acquire Chrysler LLC, uneasy suppliers and workers are bracing for a deal that would combine two struggling automakers and cost tens of thousands of jobs.

But as GM struggles to line up financing for an acquisition, attention has turned to an even more uncertain prospect: What happens if the controversial deal falls apart?

For Chrysler, owned for the past year by Cerberus Capital Management, the options are dwindling, according to bankers, consultants and experts on corporate strategy.

If GM pulls out, people briefed on the talks expect Cerberus to seek another buyer for the maker of Jeep, Dodge and Chrysler models. Failing that, Cerberus would likely look to break up Chrysler and sell whatever assets it could, they said.

"Selling off assets will only become strategy if GM is off the table and they have not found any other buyer," said one person familiar with the matter, who estimated the GM deal now has about a 1-in-3 chance of success because of difficulties in securing outside funding.

Another person familiar with Chrysler's planning said the automaker had drawn up scenarios that would involve selling key assets like the Jeep brand, its specialty parts business Mopar and even its engineering operations if Cerberus is pushed to break up the 80-year-old automaker.

Both GM and Chrysler have declined to comment when questioned about the merger talks. Both automakers have also ruled out bankruptcy as an option as they restructure.

But analysts say the rush by GM and Cerberus toward a deal highlights the threat posed by the credit crunch as an auto sales slump that began in the U.S. market spreads to Europe.

J.P. Morgan analyst Himanshu Patel said this week he expected GM to survive by raising liquidity through steps that could include getting tax-payer backed loans and selling assets. He expects GM to burn through $12.4 billion in 2009 and to post losses through 2010.

GM shares, down more than 75 percent this year, could bounce higher if a Chrysler merger appeared to ease its liquidity pressure, he said. But he added: "We increasingly view any such rally as potentially tenuous."

Cerberus founder Stephen Feinberg, who bought Chrysler in a $7.4 billion deal with Daimler AG last year, is eager to cut his exposure to the auto business and to increase his 51 percent stake in GMAC, people familiar with the talks with GM have said.

FROM BAD TO WORSE

One reason for Cerberus to press for a quick deal is that the private equity firm has effectively cut off investment on Chrysler's vehicle development beyond 2010, analysts said.

"Time will not be their friend," said Kimberly Rodriguez, a principal at Grant Thornton LLP, an advisory firm with a specialty in automotive restructuring.

Rodriguez estimated that 30,000 to 40,000 jobs could be lost if GM absorbs Chrysler and the smaller carmaker's supplier base would be decimated. "This is not a hit most could take," she said.

MORE HERE
 

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Considering how much pressure there is on Cerberus to sell, I hope GM makes darn sure they are getting the better end of the deal. Also, Diamler practically gave away Chrysler to Cerberus for taking on the pension and other obligations. GM should remember that.

Just my opinion, but Cerberus is probably much more savy about these things then GM but GM should have lots of leverage. I sincerely doubt Goshn really wants Chrysler nearly as bad as Cerberus will pretend he does.
 

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Cerberus will drive her off a cliff unless someone steps in. GM can't be accused of killing an entity already consigned to doom.
True.

Of course look out for the new Michael Moore (yes i know it was Chris Paine) movie, Who Killed Chrysler?
starring, nonetheless the Liberal Toyohonsan loving media.
 

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Cerberus will drive her off a cliff unless someone steps in. GM can't be accused of killing an entity already consigned to doom.
I have to agree with that. Some of the chrysler dealers are suggesting that all the new product since chrysler was bought has been in the pipe since Daimler had it. And now would be a good time to sell if there's no new investment in vehicles. No one would be the wiser, but it has to happen fast.

And here I thought Chrysler had a steady balance sheet, Reuters just printed an article about how Chrysler is still moving ahead with the phoenix V6 and Jim Press said that their income was steady and profits were very close to coming into the black.

Guess Press is either lying or he's in the dark.
 

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I really hope GM obsorbs Chrysler!!
 

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I have to agree with that. Some of the chrysler dealers are suggesting that all the new product since chrysler was bought has been in the pipe since Daimler had it. And now would be a good time to sell if there's no new investment in vehicles. No one would be the wiser, but it has to happen fast.

And here I thought Chrysler had a steady balance sheet, Reuters just printed an article about how Chrysler is still moving ahead with the phoenix V6 and Jim Press said that their income was steady and profits were very close to coming into the black.

Guess Press is either lying or he's in the dark.
With a big grain of salt, I'd listen to Jim Press before I listened to AN on this one.

Keep in mind the source of this article is AN, who has consistently given the appearance anyway, of being full of staff that's long Toyota and short GM.

You know all the little things - like failing to report for 5 or 6 plus years on Toyota's billions of dollar class action lawsuit concerning sludge - when it was on going.

The whole article like so many others is wrong in the most basic sense ie how its framed - which is SOP for spin and propaganda.

Cerebus and Chrysler even under pressure from the banks etc have many more options than GM or just going it alone or fully merging with somebody else.

There is a lot of spin out there from a lot of different perspectives - for a lot of different reasons - this is just one type of all that.
 

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And here I thought Chrysler had a steady balance sheet, Reuters just printed an article about how Chrysler is still moving ahead with the phoenix V6 and Jim Press said that their income was steady and profits were very close to coming into the black.

Guess Press is either lying or he's in the dark.
They only need 1c of profit to say they made a profit, a profit from operations doesn't necessarily mean that overall they are profitable in regards to legacy costs etc.
 

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This is being sold the exact same way the Daimler-Chrysler merger was sold ten years ago.

They promised massive cost savings, product "synergies", a combined global automotive powerhouse... none of which ever materialized. This proposed merger is being sold on the exact same things.

When it was all over and Daimler and Chrysler split it ended up costing Daimler over 30 million dollars and left Chrysler a shell of itself driven right into the ground.

There is nothing that makes this proposal any different. In fact it's worse, both companies are on the verge of oblivion and any combination isn't going to do anything to change that.
 

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With a big grain of salt, I'd listen to Jim Press before I listened to AN on this one.

Keep in mind the source of this article is AN, who has consistently given the appearance anyway, of being full of staff that's long Toyota and short GM.

You know all the little things - like failing to report for 5 or 6 plus years on Toyota's billions of dollar class action lawsuit concerning sludge - when it was on going.

The whole article like so many others is wrong in the most basic sense ie how its framed - which is SOP for spin and propaganda.
I am really astounded that there are people like you still out there that believe this type of crap after everything GM has done for the past 15 years.

Global dominance was GM's to lose, and they lost it. Period. It's not some vast media conspiracy. It's that GM is so comically mismanaged it would be hilarious if i wasn't so sad.
 

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The thing that I think some folks are missing is what if this does work out in GM's favor? This could be the deal of the century. I realize that this is a long shot but what if? With all that GM has going on I would hope they know what they are doing. The cost of them being wrong could doom them and Chrysler to the ash bin of history.
 

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Maybe a group of us can step in acquire Dodge for nothing and run it into a new Golden Age since there are quite a few "experts" on this board.
 

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"One reason for Cerberus to press for a quick deal is that the private equity firm has effectively cut off investment on Chrysler's vehicle development beyond 2010, analysts said."

This can't possibly be true. I thought Chrysler was going to beat the Volt to market with it's various electric cars. Yeah, right!
 

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Selling off assets will only become strategy if GM is off the table and they have not found any other buyer," said one person familiar with the matter, who estimated the GM deal now has about a 1-in-3 chance of success because of difficulties in securing outside funding.

We all knew the intentions of cerberus eventually....
 

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IMO this plan may bailout chrysler, but this merger is stupid.

1.There is too much overhead to cut.
2.Besides minivans/jeep, every division (gm vs chrylser) cross competes with each other.
3.Entire arms of both companys would die a unnessary death with rich history (chrysler,pbg,saturn)
4.The idea of making a slow moving whale 2/3's fatter doesn't help the situation as it hinders it:D.

The only real benefit is now gm would have more leverage on getting the govt. to sign another massive bailout into law, which doesn't outweigh the negatives.
 
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