I have a feeling this is the New York Times being a little mischevious. They’re not exactly known as being fans of Detroit.


Be that as it may, they’ve run a story today (http://www.nytimes.com/2008/10/11/business/11auto.html?_r=2&hp&oref=slogin&oref=slogin) claiming that there’s serious talks that have been underway for around a month now, with a view to merging General Motors and Chrysler.


<blockquote>The talks between G.M. and Cerberus Capital Management, the private equity firm that owns Chrysler, began more than a month ago, and the negotiations are not certain to produce a deal. Two people close to the process said the chances of a merger were “50-50” as of Friday and would most likely still take weeks to work out.

</blockquote>
So they’re talking. What might be the outcome? Personally, I’m struggling to see the benefit to either party here.


<blockquote>If G.M., the nation's largest automaker, combined operations with Chrysler, the smallest of Detroit's Big Three, they would create an auto giant that would surpass Japan's Toyota Motor Company, which recently has been battling G.M. for bragging rights as the world's largest automaker.

</blockquote>
Aaah. Bragging rights. Righhhhhhhht.


Honestly, other than bragging rights, where’s the benefit here. GM need to encourage dealers to close. The combined entity would have models that are out of touch with the market, too much manufacturing capacity and at a time when GM would like to reduce the number of dealers, they’d have heaps more.


Where’s the upside? Economies of scale, perhaps? Maybe, in some areas, but I can’t believe the benefits will outweigh the difficulties of unwanted stock, management cultures, dealer problems. You name it, there’s probably an issue with it.


And then there’s the brand issue. GM’s current north American stable of Chevrolet, Pontiac, Buick, Cadillac, Hummer, Saturn, GMC, Saab would be joined by Chrysler, Dodge and Jeep. They need another three brands to manage/market/develop/dilute like they need a hole in the head.


If someone’s got some thoughts as to what the benefit might be, please enlighten me/us in comments. The NYT story is pretty grey, really, calling it a 50/50 chance and saying that Chrysler are still talking to Renault/Nissan as well as to GM. Talk about covering your bases.


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Thanks Wulf!


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http://feeds.feedburner.com/~a/trollhattansaab/ceTX?i=AZPcvk</img> (http://feeds.feedburner.com/~a/trollhattansaab/ceTX?a=AZPcvk)

http://feeds.feedburner.com/~r/trollhattansaab/ceTX/~4/417617256

Not just New York Times running the story, others as well.

As long as you have Ford, GM, Chrysler all competing in all segments of the market, no one is going to make any real money. One (likely GM or Chrysler) will go to the wall. A merger of 2 gives a chance but not a certainty of someone making some money, but it would need severe segementation & dealer rationalisation. Maybe less painful than a sudden closure. I can't see why anyone outside the US (Renault and the like) would want to buy a slice in a saturated market with chronic overcapacity, so it will be a merger. Maybe not soon though, I suspect there is a load of bad news still to come as they realise that carmakers are really in the finance, loans & leasing business not the manufacturing business and their customers are the same people who have just defaulted on their mortgates .....