GM and Chrysler in Merger Talks
We are in financial turmoil, and in addition to the banking industry, the automotive industry and especially the big three US automakers are in a perilous situation.
Both the New York Times and the Wall Street Journal are reporting that GM and Chrysler are in preliminary talks for a possible merger citing unnamed persons familiar with the matter.
The lynchpin of the potential deal is the Cerberus private equity group that owns 51% of GMAC, GMs financing arm, as well as 80.1% of Chrysler.
A combined entity would control 35% percent of the North American automotive market easily surpassing Toyota as the world’s largest automaker.
The deal is fraught with difficulties and complexities, but apparently has a 50% chance of happening according to unnamed sources. It would involve merging 100 plants, 190,000 employees, 11 brands, and 10,000 dealers.
GM spokesperson Tony Cervone said “without referencing this specific rumor, as we’ve often said, GM officials routinely discuss issues of mutual interest with other auto makers. As a policy, we do not confirm or comment publicly on those private discussions, which in many cases do not lead anywhere.” GM sources have also indicated that through streamlining all the assets more than $10 billion in savings could be achieved. And, the combined entity would be entitled to a larger share of the upcoming $25 billion government loan.
So, could this be the marriage that saves the US auto industry industry, or just two giants boarding a sinking ship together?
I might have to change the name of the site to GMChryslerVolt.com
[UPDATE: The New York Times is now reporting that GM initially held talks with Ford starting in July but Ford broke them off in September, leading GM to seek discussions with Chrysler.]
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(4 votes, average: 5 out of 5) 
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96 Responses to “GM and Chrysler in Merger Talks”
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October 11th, 2008 at 10:12 am
I don’t see how this would benefit GM. Chrysler has a lot to gain because they don’t have any good car platforms. GM on the other hand doesn’t really lag behind Chrysler in any area. I just really don’t like the sound of “merger”. If GM was to buy and control Chrysler that would be one thing, but I don’t want Chrysler management anywhere GM’s cars.
October 11th, 2008 at 10:15 am
hmm…mixed. In actual vehicle manufacturing circles this has long been rumored as the only way for a US automaker to exist into the future. Three is too many to support until they get their competitive edge back.
Market wise this would cement a nice bedrock in the commercial vehicle market providing stable income. This is one market that I always laugh when the “Domestic manufacturer’s don’t make anything anyone wants or needs, Toyota and Honda RULE” folks come out but I never bring it up. Toyota and Honda are utterly uninterested in doing commercial vehicles or developing the commercial upfit partnerships that are necessary to do business in the US. Think plumber vans, box trucks, contractor vehicles, dump trucks, Transit Buses. Nissan is trying but the Asian automaker business and engineering models just do NOT allow for mass modification and conversion of their vehicles. It drives them crazy.
Chrysler + GM would easily grab 75% of that market. Not a bad bedrock when you run the SVM numbers and the only other competition is Ford which is in dire straits itself.
The sword of damocles hanging over this deal would be the simple fact that: No company in the manufacturing business has ever been successful combining two struggling companies laden with debt into one successful one without one or the other being in chapter 7 or 11.
October 11th, 2008 at 10:23 am
And then there were 2….
Say Lyle, if GM & Chrysler merge, will you change the name of this website to http://www.chrysler-gm-volt.com?
Just curious.
October 11th, 2008 at 10:25 am
Since Bob Lutz worked for Chrysler, back in the LH days, he must know the company fairly well. I’d like to hear his opinion.
October 11th, 2008 at 10:30 am
Interesting. I’m not crazy about the idea of the companies merging. I’m not against Cereberus from injecting money into GM, though.
I personally work for a company that is owned by a holding company. This holding company owns some of our competitors as well. Interesting way of doing things. This way, no matter which subsidiary who does better, the company does well financially.
October 11th, 2008 at 10:37 am
I read that if something of a merger was to happen, it would basically be giving Cerberus Capital Management the rest of GMAC and GM swallowing up Chrysler. Chrysler still has a small cash horde, and GM needs that. GM could spread vehicle platforms across all of the 11 brands and eliminate any redundant or overlapping models to save more money. Chrysler would be able to survive and hopefully thrive off of coed research and development and maybe quality would boost as well.
It seems like a smart plan to me.
October 11th, 2008 at 10:53 am
I would just hate for chrysler ..”quality”… to rub off on GM products
(I have had horrible experience with any chrysler product. I don’t think I got 4 lemon’s in a row, either… :p)
October 11th, 2008 at 11:00 am
I see this as the positive evolution of the US auto industry. The Volt as the flagship world sedan and Chryslers newly introduced prototype electric hybrids that will cover most other market segments, with the jeep, mini-van, and sports car, This can be the basis of a modern and very well positioned new global car company. Now it’s time for a new name and new beginning.
October 11th, 2008 at 11:05 am
The only thing that will save the American automakers is for them to jettison their biggest cost disadvantage - union labor rates. We
have seen for years how the UAW fixes labor prices by playing one automaker off against the other, and colludes to control labor rates. All of this is clearly monopolistic and should have been the target of anti-trust activity decades ago. but with the unions controlling so many politicians (the Michigan legislature is owned by the unions - they haven’t opposed any union supported law in the past 60 years). Those $125 per hour Chrysler labor rates (which the union controlled puppet politicians euphemistically refer to as “decent wages” will kill any company. It’s called “Restraint of free trade,” which in this case is the trade in labor.
If the government is too frightened politically to act, the only way to combat a monopoly union is with a monopoly union employer - if Ford, GM and Chrysler all combined, that would be the end of the UAW’s power - they could no longer keep 2/3rds of their workers working and paying the living for the other third that is striking one of the Big Three. And union-controlled Michigan apparently pays these striking workers as well. So the taxpayers are paying unions to enable them to increase the price of the products they are buying. Logic was never a big component of Michigan politics.
The media is also frightened to take on the unions - virtually all
of their employees are unionized - how’s that for an “independent” source of news?
October 11th, 2008 at 11:08 am
Not so sure about this. Makes you wonder why GM needs more SUVs (Jeep) and the Viper to compete with the Vette. At a time in the 80-90s Chrysler had some good small cars out like the neon but they seem to have gravitated. On the other side of the equation this would give GM more size to compete with the growing Toyota.
October 11th, 2008 at 11:17 am
Everyone write a letter to Washington.
Seems we should own Chrysler since we are bailing it out…
We have Billions to put down from us bailing it out.
Lets show the greedy old school corporate boys how to manage a company. With all the smart people on here we can put one hell of a team together!
…Is this just a fantastic write off opportunity for GM to pay zero taxes and show their new acquisition as a pure loss…
October 11th, 2008 at 11:17 am
10 Grizzly:
I concur…Ford would make miles more sense to merge with given their terrific small car line up. Ford just lacks the necessary resources at the moment to bring those good euro models to the States.
Chrysler isn’t horrible but Ford would make the merged company much much much more competitive and synergistic. The only wild card is the technology and research Chrysler has laying around. Namely GM can triple or quadruple the number of E-Flex vehicle offerings.
October 11th, 2008 at 11:19 am
I don’t know what to think of this, It would be nice if they merged because then they may pass Toyota and become number 1, but then where I live there is a GM Dealership called Watrous Mainline Motors, I just can’t and don’t want to see that start selling Chryslers, Dodges, and Jeeps. It already has almost 7 lots of cars, and GM is the only car company that I would consider buying from.
October 11th, 2008 at 11:20 am
This is a pretty stupid idea. Just when GM is struggling to figure out what to do with the brands they have and are looking to shed some, they want to get more redundant brands??? As they are shuttering plants and sending workers home, they want to acquire more manufacturing capacity??? Is it really just so they can say they are the biggest in the world? For how long before they’re just a burning carcass that Toyota, Honda and others can buy up the wreckage for pennies on the dollar.
The real reason they want to do this merger is because THEY’RE TRYING TO CREATE A COMPANY THAT “IS TOO BIG TO FAIL” and guarantee that they will get a government bailout. Very sad and embarrassing for America. Seriously GM and Chrysler, get your own houses in order independently and move on. Spend what little money you have on left on really improving your product by giving Americans what they really want, an American car that lasts like a Toyota in every detail. You have yet to accomplish this.
October 11th, 2008 at 11:24 am
If Chrysler really does have its ENVI unit up and running…the three EVs that were displayed the other day, I’d be curious to see if GM bites. A BEV Roadster is a stellar addition along with a minivan.
I must say I’m skeptical this will help either company.
October 11th, 2008 at 11:25 am
Viper + Corvette = Viperette or Corviper ?
[Viper ZR-1 could work...]
Durango + Traverse = Durangoverse or Travango ?
Camaro + Challenger = Camallenger or Challamaro ?
They should get Ford to join in on the talks. Then when they combine them all, they could call it “American Motors Corp” or AMC for short.
October 11th, 2008 at 11:27 am
Hmmmmm…….
It was said earlier, this would give GM a dominating position in the commercial truck market. Plus Jeep is definitley a brand worth having.
If all they have to give up is the other 1/2 of GMAC, which they want to unload anyway….. Sounds okay in theory..
But the devils in the details, how much of Chrysler debt does GM have to take, how much of Chrysler cash does it come with, how much more of the $25 Billion do they get?
October 11th, 2008 at 11:53 am
The economics of auto-making (lower costs with higher volume) make such a combination attractive. It offers the hope of fewer but more attractive car and truck models. For us, it offers the hope of a company that can stay alive long enough to build the Volt.
The downside is that any such combination will be a major distraction for GM management during a critical time period.
These companies are not going to merge together smoothly. What has to happen for there to be a unified outcome is that most of the one or most of the other has to be closed down.
October 11th, 2008 at 11:59 am
#16 Gordon on the combo as AMC
+++++++++++++++++++++++++++++++
Yes, the unexpected return of AMC
October 11th, 2008 at 12:20 pm
The auto industry needs more competition, not less. Merging is exactly the wrong direction.
Antitrust (monopoly) laws should prevent this from happening.
October 11th, 2008 at 12:23 pm
I think GM should stand on it’s own. The Delta/ICE is a huge move forward and shows that GM CAN ADAPT and COMPETE in the world market.
Add the new Camaro, Impala, Plug in Vue, Solstice, Malibu and the awesome line of future D/ICE Volt off shoots. It’s clear GM has mentality changed from a doughnut eating Goliath to a weight room Warrior.
As I said in a prior post. Bob Lutz’ plan to be transparent with the D/ICE program in itself speaks volumes. Now, if GM follows through with a very simple ~ no haggle ~ approach to D/ICE sales this new way to travel will be the talk of every water cooler meeting in America and possibly 1/4 of the rest of the world.
In the 3rd quarter of 2010, GM show rooms should post a sign next to the D/ICE vehicles that states GM’s mrp (manufacturers retail price). And also describes the Federal rebate, and the State rebate.
It’s as simple as this.
example:
1>This is the new Electric drive Volt offered to you at GM’s no haggle price of $33,999.
(with tax, license, transport, prep, registration) $37,340
2>The Federal Government offers a $7500 rebate on this clean air vehicle through 2014.
3>The State of (your state) offers an additional $1000 on this clean air vehicle for the first 500 sold.
Full cost to you after rebates: $28,840
This is not the time to go to the Saturday night dance for courtship when the big game is on Sunday morning.
=D~
October 11th, 2008 at 12:28 pm
yes yes yes! Do it, do it soon, and do it well. Get Ford in on it too. The only way to weather the financial storm is to hunker down, make products people want, and cut costs. Economies of scale can work out well for a combined US automaker.
Also: EREV avenger? EREV Focus?
Yes, please.
October 11th, 2008 at 12:30 pm
I may be way off on this but didn’t GM and Mercedes have several joint ventures, a few years ago, such as Hybrid Drives and six or more geared auto-transmissions? That was during the time that Mercedes owned Chrysler. There may be a lot more synergy between these two companies than we realize.
By the way, we’re on our fourth Jeep Grand Cherokee and went through four Saturns while commuting 40,000 miles a year. Both are very good vehicles.
October 11th, 2008 at 12:52 pm
GM and Chrysler…what will they call it? GMC????
OHHHHHH ZING!
October 11th, 2008 at 1:02 pm
Don’t be fooled….
This is purely a tactical move by GM to lock down the supply lines for that coveted “Corinthian Leather” !
Before the ink is dry on any deal, Bob Lutz, Lee Iacocca and Ricardo Montalbán will appear together before Congress to ask for “Special Financing”.
October 11th, 2008 at 1:19 pm
hi Exp_EngTech #25,
I believe Andy Granatelli also has a small stake in the Corinthian Leather production facility located in New Jersey. I didn’t mention rich Corinthian Leather in my #21 post as I thought it was a ‘given’ to be featured in the GM D/ICE line.
=D~
October 11th, 2008 at 1:26 pm
What is going to happen to the Volt if this happens?
Will it be turned into a trashy European styled sub-compact and renamed
the MilliVolt?
October 11th, 2008 at 1:33 pm
So, will a merger drive Down the labor cost per vehicle to what Toyota is paying?
I thought GM was trying to get smaller, rather than larger. Or is this like one of those Hollywood mariages, where one is eying the other’s body (E-Flex) and one is eying the others bank account?
October 11th, 2008 at 1:35 pm
Fat Merger Payouts For CEOs
http://www.businessweek.com/magazine/content/05_50/b3963106.htm
October 11th, 2008 at 1:56 pm
Mergers of large companies usually don’t work.
Apart from reduced competition it kills lot of jobs (thats how the cost reduction happens). If one of them will surely go down otherwise … it makes sense.
October 11th, 2008 at 1:56 pm
I am amazed at the companies that ignore the customer wants and needs in their products. The auto industry is just one example of this attitude. Build oversized, overpowered vehicles that are gas guzzlers and wonder why the lots in Detroit and dealerships are full of vehicles that won’t sell. I own two Chevrolets and had two prior to these. The quality and economy has gone down as the price has gone up. I drove Toyotas prior to Chevrolets and had great reliability with a decent price. Due to my geographical location after I retired I went to GM’s. The drop in GM sales has been dropping for quite awhile but GM management hasn’t responded to buyers. We had gas lines back in the 70’s that should have given the auto industry a hint that they needed to retool and wise up. We now have Mustangs with 550hp engines that are supposed to drive on the same roads as the 135hp vehicles. We aren’t on a drag strip so where is the need for all this power? GM plans to come out with a H3 with a crew cab and a pickup bed. For what? As I said before, if the Battery Pack is the issue on the Volt, leave it out and sell a 50mpg economy car without it.That would drop the Volt price conciderably and let GM test the market. Add the Battery Pack when when they get the bugs worked out as an upgrade.. Whether GM and Chrysler merge or not, Toytota and Nissan will out produce them because they listen to the buyers market. Oil prices are down as is gas so I guess GM, Chrysler and Ford will think the guzzler market will go back up. I hate to see the economy in the shape it is in but a lot of it is self inflcted.
October 11th, 2008 at 2:12 pm
The sky is falling! The sky is falling!
October 11th, 2008 at 2:15 pm
Perhaps a new leaner stronger company can result.
One that builds cars and trucks on a Volt-like platform and has more favorable labor agreements which allow it to complete with offshore manufacturers.
Labor contracts might be the hardest part of this.
October 11th, 2008 at 2:17 pm
The biggest issue with American cars, in my opinion, is the ridiculous distribution network, as I think others alluded to here. Chrysler is the only one to overtly point out that they need to eliminate dealerships. Although I wonder if GM and Ford are simply trying to bankrupt the dealerships with bloated inventory, no financing, and the elimination of lease programs. We simply have too many dealerships– who have a vested interest in poor quality, hidden fees, and silly options (not to mention redundant lineups)–who hold both the OEM and the public hostage. If acquiring Chrysler gives GM leverage to get rid of the loads of swarmy dealerships, then I think we have a winner.
The economies of scale that could be realized are impossible to ignore, in the BILLIONS annually. The timing in most regards couldn’t be worse. Shedding overlapping assets are not going to generate the cash that it should, and GM certainly doesn’t need any more distractions from their vision. An acquisition would be a big distraction for a company that finally executing on a bold vision, as noted above # 18 RB and others, this would be a distraction.
On the other hand, without the crisis, would this option even exist?
As for #20 carcus’ monopoly concerns, what planet do you live on? One can easily choose from GM-Chrysler, Ford, BMW, Mercedes, Toyota, Honda, Issuzu, Mazda, Nissan, not to mention the innovative start-ups like Tesla, Aptera, Fiskar. How many cell phone companies can you choose from in your neighborhood? The only thing close to a monopoly is the UAW in this industr, as #9 Kent so rightfully noted.
TCVMNOMFT
October 11th, 2008 at 2:41 pm
Excuse me, gentlemen (and ladies, if any) but does anyone remember the last “merger” that happened with Chrysler? There was a reason Daimler Benz unloaded Chrysler. It might have had something to do with the bargeload of cash that was hemmoraging from the pentagon star thingie brand. Not to mention Mercedes-Benz’s reputation for quality became abysmal as a result. As many problems as GM is going through, to join with a company whose last best design is about to be sold off (Viper) coupled with crappy designs, more V8 laden vehicles than necessary, too many suv’s, and garbage product design If these two companies were blocks of stainless steel I wouldn’t weld them together.
I apologize ahead of time because of my GM bias. But Chrysler has had disappointment after disappointment from a design standpoint, while GM has progressively gotten better. Too bad the economy messed that up. But I can say this-I don’t EVER want to see a car as beautiful as the CTS-V being sold side-by-side with a bland and dated looking 300. No merger. If Chrysler wanted to flourish, they should have listened to Bob Lutz and Tom Gale and when they had them. Too late. Let them get out on their own.
October 11th, 2008 at 2:53 pm
All this is to try to sell off of GMAC, and that’s it. Gm is not mergering with Chrysler period.
October 11th, 2008 at 3:18 pm
Morgan #12
Maybe it’s a combo of plants and cash that Chrysler has. I wouldn’t count out grandstanding as a motive either, might boost the non existent stock price to negligible which would be an improvement.
October 11th, 2008 at 3:27 pm
Hey #24…what if they get Ford too.
GMFC…
Lets not go there…wow. lol
October 11th, 2008 at 4:33 pm
How can people be in favor of this? It’s good for no one.
Company - even more bloat, combining two large companies that are doing very poorly is not going to make one big money making GM.
Employees - Massive layoffs once they merge.
Consumers - Monopoly only fun if you are the one controlling Boardwalk with hotels on it.
Taxpayers - You really think GM is going to buy Chrysler without asking for a massive low-interest loan or some other tax-payer financed bailout?
October 11th, 2008 at 5:49 pm
Other than minivans GM has absolutely no need for Chryslers automotive operations. Until I see the writing on the wall, this will remain a distant rumor.
October 11th, 2008 at 6:03 pm
#40 kshuwail says “GM has absolutely no need for Chryslers automotive operations.”
====================================
For the most part that’s true, but GM would like their cash, and GM would like for there to be fewer dealers and models of cars for sale in the US. That is, it is to GM’s advantage for Chrysler (or any major competitor) to be closed down.
October 11th, 2008 at 6:15 pm
Yes, who knows how quickly they could go bankrupt if they combined their bankruptcy powers?
This makes no sense at all. Aside from the Jeep brand Chrysler is a complete waste. And the Jeep brand isn’t what it once was.
October 11th, 2008 at 6:17 pm
RB #41
“For the most part that’s true, but GM would like their cash”
*** *** ***
What about their liabilities? Are you saying the plan could be to just snag the “going concern” enabling cash and carry the liabilities on the books and then dismantle Chrysler?
October 11th, 2008 at 6:20 pm
I don’t know what to think about this.
From an historical standpoint, I would rather see Ford remain Ford.
Chrysler could merge with GM, but I don’t know what there is to gain really.
I would assume any merger wouldn’t include money being paid out to anyone. I can’t see how either company can afford to buy the other.
October 11th, 2008 at 6:43 pm
A DOT study said that in 2006 the US had 250,851,833 cars. This doesn’t take into account trucks, motorcycles etc.
Is there really enough untapped market to support all of the existing car companies? It doesn’t seem like it. They should keep merging, and we shouldn’t be asked to keep bailing them out.
Go volt!
October 11th, 2008 at 6:54 pm
I fail to see any advantage to these two losers uniting. If GM’s cash-poor BUT has prospects, the capital markets should appreciate that and provide GM money.
Of course, the capital markets have examined GM’s prospects and delivered their decision, which is why GM is going begging to the taxpayers and talking about a Chrysler merger.
Too bad Lutz and Wagoner didn’t get the axe before it was too late to save GM.
October 11th, 2008 at 7:08 pm
WSJ states that a GM/Chrysler merger will save $10 BILLION per year after completed. Layoffs, closed factories and dealers will save the combined company. Also, When Cerberus purchased Chrysler, Daimler Benz assumed most of the debt of the old Chrysler. They practically paid Cerberus to take on Chrysler. There is very little debt on their books. The CEO of Cerberus was on CNBC the other day and was asked about their cash on hand and current cash flows and he said” we don’t disclose those things any longer; we’re a private corporation. My bet is that Chrysler is in relatively strong shape. Yes, GM would probably exchange its 45% ownership of GMAC to Cerberus for their 80% of Chrysler; something like that.
Forecasts suggest that over 600 auto dealers in the US will fold between now and next June.
October 11th, 2008 at 7:28 pm
#43 Grizzly on GM taking Chrysler’s debt, too
====================================
My assumption is that GM would take the debt, but that it would be attractive in that it would be either relatively small or a little further off into the future. In the meantime, they would hope, they could generate income from sales that would have gone to Chrysler.
It is all speculation on my part. I really have no idea what they are doing or why.
October 11th, 2008 at 7:35 pm
dagwood55 #46
“Too bad Lutz and Wagoner didn’t get the axe before it was too late to save GM”
*** *** ***
Without Wagoner and Lutz there would be no Volt, No Malibu, no Aura, no Solstice, no Enclave and NO prospects. Any wall street type could have continued the re-badge-a-mint and played the income statement like GM had done for the last 30 years, but financially they wouldn’t be any better off and they would have NO prospect for the future. That’s like blaming Ford’s situation on Alan Mullaly.
October 11th, 2008 at 7:50 pm
Hey, I think this is great, we could get a Viperette, you could call the new company “General Chrysler”, and I would be able to trade my 2004 Dodge diesel one ton truck for a Volt =hallelujah
NO PLUG NO SALE =D–$00.00
October 11th, 2008 at 8:14 pm
#34 D Lo,
“As for #20 carcus’ monopoly concerns, what planet do you live on? One can easily choose from GM-Chrysler, Ford, BMW, Mercedes, Toyota, Honda, Issuzu, Mazda, Nissan, not to mention the innovative start-ups like Tesla, Aptera, Fiskar. How many cell phone companies can you choose from in your neighborhood?”
________________________________
Ahhh, telecommunications. Interesting you should bring that up.
Here on Mars, I’ve got at least 10 cell phone companies I can choose from.
It’s a very competitive market place.
It’s an industry where prices have come down.
It’s an industry where services have gone up.
It’s an industry that . . . .
Got broken up by an antitrust lawsuit.
“The break up of AT&T was initiated in 1974 by the U.S. Department of Justice antitrust suit against the telephone monopoly.”
http://en.wikipedia.org/wiki/Bell_System_divestiture
Gotta go. Headed back to my garage to work on my Q-36 space modulator.
October 11th, 2008 at 8:26 pm
Black Gold is trading for $77/barrel ! The lowest in more than a year. Thank you Sarah Palin the Alaskan Oil Queen. Drill Baby Drill.
October 11th, 2008 at 8:33 pm
Why would GM want all those Chrysler Dealerships. They already have too many dealers and have been trying to shrink them for years. The only thing I can see that GM would want from Chrysler would be their advanced EV technology, some of which is beyond GM’s current capabilities. If they merge they had better get out one ginormous AXE and start swinging in all directions from the top down.
October 11th, 2008 at 8:42 pm
Chrysler’s parent company (some 3-headed monster) just wants the remaining 49 percent of GMAC that it doesn’t already own. Then anyone financing a GM or Chrysler in the future will have to make a deal with them exclusively. GM might just give up that cash cow to get their grubby hands on that advanced EV technology that Chrysler has been keeping a super secret for years.
October 11th, 2008 at 8:46 pm
when Polsi, Ried. and Obama get in there wont be anymore
dirll baby drill,
October 11th, 2008 at 8:51 pm
#53 Dilbert:
Yep agreed, when Chrysler unleashed those three EVs a few weeks ago you could hear GM’s jaw hit the floor. GM still hasn’t recovered from that shock. Chrysler shook the core of the automotive universe, since then every major auto company has put their EV projects on “high priority” status. If you see any company beat GM Volt to the market you can thank Chrysler for putting the fear in the rest of the auto makers. Yes, everyone already knew about the single Volt concept and dismissed it as a non-threat niche car. But it was Chrysler that has waken everyone up.
October 11th, 2008 at 9:03 pm
This could be scheme to use GMAC to take over the car battery market. Force all EV owners to purchase/lease battery via GMAC. You will have no choice but to fork over some jack to Cerberus if you want to drive a new EV. There is definitely more to this story than meets the eye.
October 11th, 2008 at 9:07 pm
Dilbert #53
“Then anyone financing a GM or Chrysler in the future will have to make a deal with them exclusively.”
*** *** ***
Not necessarily. Most people have a variety of financing options and usually dealer financing is not your best bet.
October 11th, 2008 at 9:10 pm
I think Obama drives a Lincoln. He and his wife would never want to be seen driving a GM or Chrysler product. It would be below their dignity. G.W. drives a Ford 350 that gets about 2 gallons to the mile. hee haw
October 11th, 2008 at 9:12 pm
Interesting…
I cannot believe an investment group as large as the Cerberus private equity group would propose a merger of GM and either Ford (negotiations were broken off) or Chrysler, without Cerberus having a plan to deal with the liabilities both car manufacturers would bring to the table.
With Cerberus controling 51% and 80% of GM and Chrysler, they control both GM’s and Chrysler’s shareholder decisions. I am NOT a corporate takeover expert, but I fear Cerberus allowing both GM and Chrysler to go into bankruptcy. Then, Cerberus could purchase both companies assets by using a new corporation. There would be no liabilities, as all prior UAW and other financial agreements with GM and Chrysler would be dissolved by the bankruptcy - GM and Chrysler would cease to exist, financially and legally.
The reason I care at all is this - my mutual funds are partly invested in both corporations, as well as many other US companies. A bankruptcy in either GM, Chrysler, or both, would not only make GM / Chrysler stock worthless, but would cause a huge ripple effect across all GM / Chrysler’s dealers, suppliers, and THEIR suppliers as well. This is exactly what the government bailout was supposed to stop.
So Cerberus gets their share of the government bailout money, times 2 (GM, Chrysler), and later, they throw up their hands and say “We tried - it didn’t work”. Then, both GM and Chrysler go bankrupt. Cerberus scoops up their assets, minus their liabilities, and forms a new car company - which tells the UAW to take a long swim across Lake Superior in the middle of January. Now Cerberus has all the government bailout money, the assets of GM and Chrysler, and none of their liabilities. As to the fate of the Volt under Cerberus - who knows ?
I admit, this is a worst-case scenerio, but it is VERY possible. I lived through the 80’s, when hostile corporate takeovers were rampant. An underpriced corporation with valuable assets would be bought out, gutted of all assets, and left for dead. And now, GM and Chrysler are about to get a big piece of $25 Billion dollars. Is this why Cerberus is so intent to close on a quick merger with Chrysler ?
October 11th, 2008 at 9:26 pm
Maybe GM wants that battery technology that Chrysler has been developing in stealth mode - code name “KONG”. It has to be something like this, otherwise it just don’t make any cents. Its the KONG battery I just know it.
October 11th, 2008 at 9:33 pm
Cerberus also owns some of the largest utility companies in the Nation. I think this plays into the whole EV thing in some way. Just thinking…
October 11th, 2008 at 9:36 pm
Somebody can smell that pot-of-gold ($25 billion) sitting there for the taking next spring. These greedy bastards are going to follow the money because they cannot see past their noses.
October 11th, 2008 at 9:50 pm
It was the best of times (1990s), it was the worst of times (2000’s).
What we have is a complete melt down in American capitalism. There’s no one left on the boards of America that can remember the 30’s and can be trusted to make prudent decisions. I would guess many of you who casually ask questions and give glib answers don’t know much about it either.
The looming depression will be worse than the 30’s. Back then 2/3 of the population lived on farms and could grow their own food. Now 90% live in cities. Nowadays people go to the government for support but we are the government and if have nothing to give, then the Government has nothing to hand out.
Over the years American wages and benefits have risen beyond reason to the point that imported goods have become the norm.
Now were about to reap what we have sewn. There’ll be no quick fix or easy way out for companies like GM, Ford, Chrysler or any other American firm. If you have a safe job treasure it. Welcome to the new economy.
October 11th, 2008 at 10:22 pm
Monopoly!
Will the car be the Volt? Get rid of the iron and thimble. Replace them with a Walmart store and a Mobil-Exxon station.
With Wall Street falling apart - Will monopoly money finally be worth something?
How did we get into this mess that we are in to begin with? How many banking firms have merged and merged and merged into a final few - and with those few failing - the American and now the world’s financial markets are falling down. How many oil companies have merged and merged and merged into the few that we have now that are now price gouging us into poverty? How many Mom and Pop stores have been put out of business by the merging of large department stores who undercut prices until there is only one Walmart - KMart and Sears merged - (and when all of the Mom and Pops are out of business, what will happen to their prices? Going Up!) and they all sell us nothing but over priced bad quality stuff made in China. Let’s merge and monopolize the remaining pieces of the USA so we can be price gouged into buying stuff made by people who are underpaid so the winners of the monopoly game can reap the benefits and we can cry about how broke we are.
Monopolies do not equal competition.
With competition you get price control and quality control. Without it, you get cheap products at high prices and no where else to go. Monopolies equal the end of what’s good for the people. This used to be a country for the people.
We are giving it away.
This is f$%&#*g depressing.
October 11th, 2008 at 10:31 pm
I have to wake up from this horrible nightmare!!!!
WAKE UP!
WAKE UP!!
WAKE UP!!!
Darn! This seems so real…GM and Chrysler…NO WAY! It’s got to be a dream!
October 11th, 2008 at 11:16 pm
The entrepreneurial spirit in America will work it’s way through this current low economic period. I am surprised to hear many stock market analysts using terms like “prolonged economic slide” “depression” and “just entering a down market”.
These doom-and-gloom reporters are simply wrong. We as Americans and willing (now more than ever) to work together for a common good. This will be more and more evident after the November 4th elections where in we can move away from the energy drain of the political campaigns.
So what if several auto dealerships go under from mismanagement.
We will see new mega dealerships which carry 10 to 12 manufactures products. Mazda will sell next to BMW, Ford will sell next to Toyota. Expect a new dealership such as “Route 66″ to be our next auto super store.
I for one am waiting patiently for a bottom to this market. A few days ago I said we needed 15% more decline. Friday we slipped a little , by 1.5%.
This coming week is predictable. It will start with a small group of 401k holders jumping off the boat for a fixed 40% loss. Mid week will be a reveal of more and more ideas and efforts from the Fed and G7 nations on ways to attain stabilization. Thursday will be the day we hit a bottom of about a 12% drop from current levels.
S&P will bottom at 790 and maintain this trading range until after the election. This will offer plenty of opportunity for investors to milk stocks for a 10% gain each few days. And the good news is that even if you do catch a stock on the (short term) higher end of the trading wave, it will be much higher at years end.
This is one of those once in a lifetime opportunities to really position yourself long term in the market. I am currently watching 3 stocks which I feel are fundamentally strong and have been unrealistically beat down because they were included in over sold mutual funds.
Just think it out…you can do it.
=D~
October 11th, 2008 at 11:53 pm
#64 LB
IMHO it’s not that bad of a monopoly. They’re still competing with all the foreign companies! and Ford! It’s kind of like saying volvo has a monopoly because they’re the only sweedish car company. (i think they’re the only sweedish car comapny…but point remains!)
New smaller companies can still grow like Tesla and Smart…hopefully the end will be rosey!
October 12th, 2008 at 12:01 am
#14 Dav8or says…..
“Spend what little money you have on left on really improving your product by giving Americans what they really want, an American car that lasts like a Toyota in every detail. You have yet to accomplish this”.
Never owned a Toyota that was worth a crap, lately. Back in the day, they made good cars, they are running off that momentum still, but it will catch up with them, like it caught up with the big 3. I’ve had my share too…Head gaskets, leaks up the wazoo, noisy brakes, they all ride like the windows are down, when they are up. JUNK……nuff said….LJGTVWOTHR….Take care all
October 12th, 2008 at 12:54 am
Dave K
Its good to hear your optimism, but were a long way from the bottom. The new breed of Americans just don’t think like the ones that advanced American society. Its a me first mentality thats been around for about 40 years and it will only disappear when we get some decent politicians to lead the country. (I don’t see any in the current crop)
We’re going to pay a very big price to relearn the basics and even then there are many who can’t learn.
October 12th, 2008 at 1:05 am
hi ED M #69,
I respectfully believe I am right on my #66 post. An S&P 790 bottom ahead. 20% growth in 09′ and another 30% in 10′. Just in time for the Volt. GM stock (if they get away from this merger talk) should be high teens by late 2010.
=D~
October 12th, 2008 at 8:15 am
This idea sounds like throwing an anchor and chain to a drowning man. I cannot see how this helps GM.
October 12th, 2008 at 12:37 pm
#49, Grizzly, “That’s like blaming Ford’s situation on Alan Mullaly.”
Not at all. Mullally has been at Ford since September ‘06. Wagoner has been with GM all his life and in charge since ‘99. Lutz has been in place since ‘02. Both were in place to pledge renewed resources to gas-guzzling trucks and SUV’s in ‘03. Lutz was available to pooh-pooh the Prius in the early Zeros. NOW, after getting spanked by Toyota around the world, suddenly Lutz thinks having an advanced tech hybrid is a five-alarm fire? Where was this vision in ‘03 when it might have saved GM’s bacon? Where was the push to develop competitive small cars in ‘03?
Lutz got his wakeup call when Tesla threatened to product dozens of cars per year! Yes, DOZENS! What a threat to GM DOZENS of cars would be!
For crying out loud… What desk was Lutz sleeping under when Toyota produced its 100,000th Prius?
Look at the original styling of the Volt - that’s a Cadillac Sixteen. Lutz knows nothing beyond muscle cars. And does the concept resemble the original? No way! They’ve run the program in such a way as to alienate as many people as possible.
The rest of GM’s hybrid program is in a shambles, too. Toyota builds a small number of models that sell briskly… they stuck to cars people would want. A Camry with hybrid drivetrain. A Highlander with hybrid drivetrain. A Prius. And they got these cars on the street at competitive prices.
What’s GM got? Hybrids with a $10K premium! GM has the distinction of offering GAS-GUZZLING hybrids! There’s no bigger oxymoron in the market place. And the local dealer inventory shows this… they’ve had a Tahoe hybrid on the lot for 173 days! They managed to sell 2 only with the help of massive givebacks, after 4 months on the lot. Even in a time of high gas prices, no waiting list develops for these beasts.
Next up… a two-mode Saturn Vue hybrid that will also hit the street at a $10K or so premium. That will go nowhere fast.
The Malibu hybrid is $2-4K more than a Prius hybrid, doesn’t get the first-class transmission and gets fuel economy slightly better than miserable. Who would want this turkey?
And GM’s response to falling sales of gas-guzzlers is to badge-engineer 4 different models of the Lambda. Which weight 5500 lbs. And is almost as thirstly as a Suburban. It didn’t occur to them that maybe people would realize they didn’t need seats for 8 when their family numbers 4? And might, accordingly, buy a smaller car?
And the devil, as they say, is in the details. The Beat thing - not coming to the US; their “world car” is unsuitable for the US and can’t be adjusted to suit. The Cruze, another world car, will take two years to get here. The new Lambdas… not engineered for hybrid drivetrains.
Who’s responsible for all these bad decisions?
Ultimately, this is all down to Wagoner and Lutz. They should have been axed while there was still time to save GM.
October 12th, 2008 at 1:44 pm
The very last BAD DECISION in a chain of bad moves. The wankel engine millions of dollars lost remember the rumor of the 4 rotor corvette. The alliance with Fiat ( fix it again tony) more money down the hole. Terrible fit and finish and bad designs in the 80s. So now we have the Titanic and the sister ship joining forces. WAKE UP GM get out of the U.S. market as fast as you can shut down and move to where the market is in the near future, China and India the U.S. is history and in a death spiral you should have gotten out 5 years ago, besides Americans hate you along with Ford and Chrysler they love the foreign cars and hate everything made in America. It is time for you to limp off into history with G.E. Ford and Chrysler unless you want to start making junk food and pizza for Walmart the only company left that knows what business is all about.
October 12th, 2008 at 2:09 pm
I like the idea. If it keeps them both afloat, then why not?
Obviously, some models would be dropped, but overall, the entire lineup of vehicles would be impressive. Plus, if the EV plans remain, this new car company would have a great lineup of choices for us!
October 12th, 2008 at 3:32 pm
#51 Carcus,
I agree telecom was a good reference. You failed to realize that several of the pieces broken up when AT&T was split up have been allowed to regroup. Why? becuase on earth om the year 2008 we have a global marketplace. at&t, although a huge American company, faces competition from global competitors of T-mobile and Verizon wireless, with the latter showing the true complexity as even seemingly American companies can have massive foreign interests.
Of course GM and Chrysler would be anti-competitive if the conditions that were present in 1980 persisted; that just isn’t the case. For business reasons a GM and Chrysler merger may still be a bad idea, but not for regulatory.
The Grump - you need to do some fact checking. Cerebus does not own 51% of GM, rather GMAC. GMAC is the credit junk that GM is trying to rid themselves of
October 12th, 2008 at 4:07 pm
http://www.reuters.com/article/newsOne/idUSTRE49B09K20081012
If this deal goes through, be prepared for some major job cuts, both within GM and Chrysler. This will include dealerships.
Strategyically, the move makes sense. It allows GM to focus on what it does best, designing & building cars, and allows Cerberus to focus on finance, something they have deeper historical experience in. It may be what the Dr. ordered to return the auto market to profits. Capacity reductions gives the supplier greater pricing power over consumers. For those worried about a monopoly, I think that’s a little silly. Toyota is the worlds largest auto maker. There’s still a bevy of other companies out there. Though if you demand an American brand, obviously your selection will get slimmer.
October 12th, 2008 at 4:32 pm
Great! Losers of the world, unite!
October 12th, 2008 at 6:48 pm
I commented on this in the last thread so, I’ll let that stand, just wanted to say, “Nice job on the photoshop job Lyle!” hehe
October 12th, 2008 at 6:50 pm
Actually, I guess I have something quasi-related, because this GM-Chrysler thing already died a death.
GM apparently is going to the fed next week to try and hit them up for 5 billion. I guess if you can’t follow through on cutting’15 billion’ to help liquidity, you just go and get a 5 billion dollar loan from the government right?
http://online.barrons.com/article_email/SB122367879305124601-lMyQjAxMDI4MjEzMTYxNzE4Wj.html
October 12th, 2008 at 7:55 pm
dagwood55 #72
The product cycle for the auto industry is about 4 years. This is what makes the Volt so compressed. Not only is it new technology, but it’s planned to be out in 3 years, a monumental task.
Wagoner has been with GM all his life and made some tough decisions. One was to concentrate on automobiles and not the diversified mess that GM was before he sold off much of the financials like GMAC etc to concentrate on Automobiles. Lutz has been with the company 5 years, or roughly ONE product cycle. GM’s problems don’t stem from decisions made 5 years ago, but rather from the last 30 years. You put too much emphasis on the Prius which Toyota sold for a LOSS for how many years when gas was selling at $1.50/ gal?? How much of Toyota’s total profit is generated by Prius sales?? It’s just too easy to 20/20 hindsight second guess decisions made by for profit companies that took the initiative to completely restructure themselves in difficult times. Why do think that both are still there? I’ll answer that, it’s because the B.O.D. knew that GM would bleed red before they see any black and they fully understand what the alternative path was.
October 12th, 2008 at 8:34 pm
Grizzly, Toyota did the Prius in 2.5 years. As unique as it was, that’s all they took. Wagoner’s been in charge 4 times that long, was presumably in a position of influence before that for some years.
And I’d consider giving Lutz a pass, except he’s a blowhard who openly scoffed at the Prius and, in spite of “personally supervising” the Volt project, made another blowhard statement about when they could drive it and was completely wrong. He’s so good at “personally supervising” this project that he missed the date of a major milestone by 4 months from a mere 4 months’ distance. If he says the Volt is ahead of schedule, there’s no reason to believe the Volt is ahead of schedule.
And the Beat fiasco and the fact that the Labmdas don’t have room for a hybrid powertrain and the Delta wasn’t ready for the US from the get-go… that’s all down to this management team.
GM is not taking steps to return it to profitability soon. GM is not enhancing the Cobalt; is not fixing the Aveo, is wasting money rebadging it as the G3, is not putting a first-class automatic into the Malibu “hybrid,” is putting a V6 into the Vue two-mode, isn’t working on volume shipments of the hybrids they can build, is spending money on a car that won’t sell in any quantity (Volt) instead of a car that might (Cruze).
And GM is not taking steps to return to profitability soon because they don’t have to; they’re relying on a bailout.
October 12th, 2008 at 9:05 pm
If GM’s price keeps falling, “Merger” may not be the word for it. “Buyout” might be more appropriate!
October 12th, 2008 at 9:15 pm
#82
If GM’s price keeps falling, “Merger” may not be the word for it. “Buyout” might be more appropriate!
——————————————
I realize you were probably just being humorous, but the opposite is true. No one wants this thing at all.
GM itself is actually worth much more than 3 billion dollars. Its percentage of the car market is actually very monsterous, it has some nice products and some valuable pieces of land (although not nearly as much as it once did). It would be quite attractive at this price except for one thing…the pesky hundreds of billions of dollars and debt that come with.
If a company where to ‘take on’ GM, it would ‘take on’ the debt as well. So ‘merging’ with another bloated, beached whale is the only other scenario that could fly.
To gain control of GM, you would likely need well less than a billion dollars to get it. Meaning that almost a thousand INDIVIDUALS could take it over, if they wanted to, forget how many companies could. That is how ridiculously cheap it is…and unwanted.
October 12th, 2008 at 9:25 pm
to address issues of redundancies, GM could merge pontiac and dodge under the dodge brand and finally make a true sports division for general motors. they could cut out all dodge’s SUVs and trucks as well since GMC and Chevy can handle that. chrysler could be discontinued and the only ‘good’ product (the 300) can continue life as a new buick flagship. jeep and hummer, although basically the same product, can coexist fine if they just cut some models. they should be merged into a new division specifically for off-road vehicles (like Global Offroad or something…) where both brands will retain their identities while covering a wide spectrum for off-road enthusiasts.
October 12th, 2008 at 11:34 pm
dagwood55 # 81
Do you remember the original Priuses? You couldn’t give them away. They also had problems. Toyota afforded their losses with the same trade policies that have enabled Toyota and other govt sponsored Japanese firms to dump whatever is necessary on other markets in order to gain market share.
WRT the Prius derivatives. Do you remember Ford’s first hybrid Escapes based on Toyota’s technology? They offered about 10-15% better mileage (on their best days) for a price premium that was anywhere between $7-10 grand over a regular Escape. They didn’t sell. Ford couldn’t afford to give these away the way Toyota did the Prius, and as you would expect they sold FEW of them. When gas was about $1.50/gallon do you really blame Detroit for not being on board?
It’s just too easy to join the press in GM bashing with crystal clear 20/20 hindsight. We know this isn’t a level playing field and decisions by relative companies reflect this. But your original post seems to infer that if GM had a “Prius” they wouldn’t be in the situation they’re in. That’s nonsense! Toyota doesn’t rely on the Prius for the bulk of their profits and anything short of that wouldn’t change the picture for GM either. It wouldn’t hurt to have a Prius, but GM already has several hybrids including 2 modes in their larger vehicles, and softies in their passenger lineup. The two-modes are far more advanced than the drive train in the Prius.
October 12th, 2008 at 11:52 pm
72 dagwood55: The Malibu hybrid is $2-4K more than a Prius hybrid, doesn’t get the first-class transmission and gets fuel economy slightly better than miserable. Who would want this turkey?
That’s a bit of an exaggeration. The new Malibu 4-cylinder with 6-speed transmission has the best fuel economy of its class.
October 13th, 2008 at 12:02 am
73 chevonly: “besides Americans hate you [GM] along with Ford and Chrysler they love the foreign cars and hate everything made in America”
It’s sad how Americans have been brainwashed to hate themselves. It’s like having a sports team told by their coaches that they suck and will never win. Why is something from a far away exotic land always considered better? Here’s a good one: Fiji Water (http://www.fijiwater.com/). Somehow people think that water bottled in locally isn’t good enough. Noooo, instead it has to be shipped all the way from from Fiji because the way that the Hydrogen and Oxygen atoms are combined there makes their water taste so much better. How ignorant can people be?!?
Americans see themselves in a black light, probably because of all the crap going on around them, namely waging unnecessary wars all over the world, which essentally throws taxpayers hard-earned money into a big money pit.
October 13th, 2008 at 1:18 am
Gary #87
“It’s sad how Americans have been brainwashed to hate themselves.”
*** *** ***
It’s called “liberalism” and it’ll never get us out of this pinch. Consumer confidence is everything and they just want to destroy it. It is not what built this country and certainly not what we need now. To those that “hate this country” I’d suggest you’ve got about 170 other choices to relieve us of your burden.
Long live the U.S.A. and long live the VOLT!
October 13th, 2008 at 6:51 am
Grizzly, “It’s called “liberalism” and it’ll never get us out of this pinch.”
It’s called “acknowledging reality.” The next step is to do something constructive about reality. When enough people stop whining about “liberalism” and acknowledge reality, we can move on to that next step.
Gary: “The new Malibu 4-cylinder with 6-speed transmission has the best fuel economy of its class.”
Bully for it. However, the last I checked, they didn’t put that transmission into the BAS vehicle and I referred specifically to it. I am led to the conclusion that even GM thinks their BAS system is worthless. Too bad… as I have said, the concept is a good one, but GM’s price and execution leave a great deal to be desired.
#85, Grizzly, I wondered when you’d get around to whining about trade policies. Go to Japan. See if they drive anythying like what GM builds. Then you’ll know why there’s no market for GM’s cars.
And Japan’s yen is depressed because Japan has some difficult fundamental problems. Of course, Japan faces their problems and Japan is not as badly mismanged as the US has been, lately.
As for the Escape, you are mistaken there, too. Ford has problems delivering hybrid Escapes at a reasonable cost, so they build only about 2500/month. There’s a waiting list. On the highway, its fuel economy gains are not impressive but it delivers the goods in city driving. Even the original models. You are welcome to check the EPA web site where you will find 13 Escape hybrids registered and they averaged 31mpg. No regular SUV comes anywhere near that.
October 13th, 2008 at 5:33 pm
#44 Rasdhiid Amul:
I’m with you. I don’t get it either.
October 14th, 2008 at 1:07 pm
Hey Lyle,
I don’t know if I am late to the party. But I have to tell everyone that this is a very sad news for GM fans. What does GM always have to find the way to humiliate itself? What does Chrysler have and GM does’t?
As a GM guy, I have to say that I am very disappinted with GM. Holden, Vauxhall, Opel, Saab, Hummer, Daewoo, Saturn, Buick, Caddy, Chevrolet, Pontiac… are not enough?
I really don’t know what to say. I just don’t get it. What is GM’s problem that cann’t be fixed internally with all the resources GM have? What’s wrong with GM?
October 14th, 2008 at 3:16 pm
You could name it GM Chrysler Company…
or GMCC for short…
but considering that Chrysler cars are
generally (ok, specifically) Crap, lets just shorten it
to GMCCC.
October 15th, 2008 at 1:10 pm
GM would never be allowed to merge with a major competitor in good times. Its only in “bad times” that such might happen.
Absorbing Chrysler would be a fine master stroke for GM, save for the management attention required. But GM is doing fine around the World, outside of NA, and Chrysler’s foreign affiliations are just about jettisoned.
So that is an advantage to the merger. The Chrysler merger is essentially a North American issue. Chrysler’s radical downsizing over time has eliminated virtually all its old facilities, so what manufacturing capacity remains is actually pretty modern, and located in North America where due to Exchange rates, these are now the cheapest sources in the developed world and preferred manufacturing facility locations.
If GM exchanges paper to acquire Chrysler, it has a MAJOR benefit in that its senior management has past Chrysler executives aboard. Many mergers turn out badly because of “surprises” that the acquiring firm does not appreciate or perceive. That is not the case here. Bob Lutz KNOWs where the Chrysler bodies are buried.
There are several attractive Chrysler assets, that can be gotten for the price of printing some paper securities. Jeep is present in the smaller platforms that Hummer never had. Killing Hummer and replacing it with Jeep is a major attraction,or adding a big SUV to Jeep from the Hummer line, would complete the product offering lineup, for off-road vehicles. Toyota offers the Land Cruiser and Jeep has never had an answer. But The Hummer is nothing but a re bodied Tahoe,so a dual-mode si ano-cost product extension ot Jeep. Perhaps more trouble than it’s worth.
Chrysler also dominates a market sector where GM has never been successful, and has now abandoned. Its Minivans are an attractive new market segment, that is worth half a million of what are additional sales, annually. The only thing they need is comparatively tiny, already budgeted, developed, and coming. These are modern v6s, and I4 turbos with 6 speed transmissions. And a T2B5 diesel that GM has available, would help too. Along with a hybrid option, too.
So adding an uncontested market segment to its sales with only minimal expenditures for product development in the next half decade is a very good virtually free addition.
The Chrysler mid-sized “D” class vehicles are modern and not obsolescent. They are simply unfinished; and are underdeveloped. They are not refined, and GM can either replace them with fine Malibu- based offerings, or simply spend the pittance to refine them. The platforms are not deficient in any other way. Certainly cheaper than redesigning from scratch with new platforms that is wholly unnecessary.
One of the oldest platforms in the GM lineup is the large car platforms. There, start and stop development leaves GM with a problem. And a compromise of using obsolescent Australian Holden RWD platforms, is at most a rank expediency.
GM wanted to go RWD, but the added weight, and 2007 CAFE law concerns, scrapped those platforms in mid-development, and preclude doing that, on a large scale. Chrysler’s E-Class based RWD platforms of the Chrysler 300/Charger, and the newer successor generation, are well sorted out chassis, and can provide a platform for a specialty RWD vehicle for all it lines. These won’t be mainline designs as the CAFE will still require a FWD platform for the the large numbers of large sedans as GM is now doing for the future DTS, La Cross etc.
But the Dual-mode hybrid setup, and especially the Dual- mode Gen II, in the works already, would certainly make these RWD designs a very saleable next generation specialty product. Toyota does this with its combined Lexus FWD and RWD offerings. The RWD offerings to satisfy the enthusiasts and auto mags; and the FWD designs for every one else seeking good handling in rough weather, along with reasonable room, and economy.
From an infrastructure standpoint,
Chrysler does have some intriguing additions to the GM repertoire that are or can at minimal expense, be attractive to GM. GM’s Ecotec I4 family in the range of 1.8 - 2.4 liters are very fine engines. With the swing to smaller platform power plants, GM production capacity for I-4s doesn’t quite meet demand. The Chrysler GEMA “World” engines are modern, DOHC,VVT, all-alloy, with beefy wall sizes, designed for turbocharging, and with HCCI in mind, needing and finally getting GDI to already available turbo charging. These engines the have been wrongly tuned for max power, giving them a noisy reputation. This was done to cover a Chrysler power deficit in the small V6 range, and obsolescent 4-speed transmissions.
All they need is some TLC engineering, to complete the job, detune the engines like Huyndai and Mitsu do, along with the arrival of large numbers of 6 speed DSC transmissions. Money that Chrysler has been forced to budget parsimoniously, and drag out development, nevertheless that is now already done. Chrysler/GEMA production facilities are constantly winning awards for efficiency and low cost of manufacture. Chrysler and GEMA can provide lots of modern I-4 engines to GM. Many of the present obsolescent GM I-4 lines can be retired. Then all GMs big I-4s will all be fully modern.
Similarly the GM 3.6 High Feature is a fine V6, but GM is capacity limited in this engine. The new Phoenix v6 and its modern production facilities will help solve that bottleneck very cheaply. GM would love to rationalize is v6 engine families. Right now it is stuck with several obsolescent v6 families; some going back to the original Citation designs in response to the 1970s fuel crisis. Buick’s v6s, carved off the Buick 1940s era v8, dates back even earlier, to the early sixties. GM can retire these older v6s families, and replace with nothing but modern HF 3.6 v6s and Phoenix v6s, and have modernized its entire v6 engine offerings on the very cheap. All will be DOHC, VVT, GDI, all-alloy, turbo ready, and then HCCI ready.
GM can also scrap all the other Chrysler V6 engine families and find some substantial cost savings to the merger. Savings will accrue from the retirement of these older GM engine facilities as well. Tangible savings.
GM is also capacity limited in 6 speed DSC transmissions. Chrysler is adding massive quantities of that 6 speed in a few months. The new factories have been built and starting to manufacture initial quantities, where they are being final-debugged in EU Dodge Journeys. This is the “quality approach” the Japanese used to assure a quality image in America, by making Japanese consumers the final debuggers before releasing the designs to America.
The Malibu has been shown to be a very nice platform with an Ecotec I-4 and a 6 speed DSC, but numbers have been limited. Making many more of these available will be well received. Migrate the “mild hybrid” setup to this drive-train, and GM will have met the CAFE 2020 targets for Malibu “D” class conventional vehicles, on the very cheap. All without spending a real dime.
Finally, GM budgeted expenditures have precluded some investments. GM Family 0 very small I4s, from 1.0 - 1.4 liter, are not the most modern power plants, although they have been thoroughly updated. GM just didn’t have the money to start with a clean sheet of paper. After the proposed merger, it might be able to address a new Family 0 engine line. Since all its other engine developments costing large sums could be substantially minimized. GM could undertake to develop a modern DOHC, GDI, VVT, all-alloy, turbo and HCCI ready small I4 engine family, to replace the Family 0, that it’s now prevented from doing by money concerns.
A Gen II Volt would profit from such a development.
October 15th, 2008 at 5:28 pm
Well, after reading the in depth review above it would appear as though this might be a good development for GM. What really irks me is that the most heinous, despicable, monolithic behemoth of a company has captivated the alternative energy imagination. Why couldn’t it have been Zap or Zip or Zapruder Motors? Anyone but the bad wolf that is GM.
Now they stand to expand further. With the recent announce of four GM-technology-based hybrids - it sounds like Chrysler is firmly behind electrification of transport too. The combination would be the world’s largest automotive company focused on building cars that “take petroleum off the table.” Now that’s got to be a bad thing for some of us. Because we all know it should be Zap or Zip or… Chery that’s building the future green world. Not the bums who killed it!!!
Meanwhile, I’m going shopping for one of those Saturn VUE plug-ins that’ll get 10 mi ALR. It’ll be one of the first plug-in hybrids and it can hold my whole family of plant people - plant loving people. And it’ll look great next to my new hotel on Park Place.
October 18th, 2008 at 3:31 pm
WHAT WILL A MERGER DO TOO GM STOCK.
LET ME HEAR IT..