GM is confident it can manage Chrysler brands

Nobody seems to mention that GM would have more US market share by
default if they bought Chrysler, which might enable them to increase
prices.

It would give GM back the title of the worlds largest vehicle maker
(which is currently closely contested between them and Toyota). For
what-ever that's worth.

BTW, Cerberus already owns 51% of GMAC while GM owns the rest.

I haven't heard anything so far if Daimler would exit their remaining
share of Chrysler if this happens.

And from here:

http://www.detnews.com/apps/pbcs.dll/article?AID=/20081018/AUTO01/810180348/1148

I raised my brow over this:

"The negotiations have been complicated by the disclosure last
week that they were taking place even though they were at a
preliminary stage. But officials on both sides want to conclude
a deal quickly -- preferably before the presidential election
on Nov. 4, when candidates might be more amenable to requests
for help."

---------------------

http://www.freep.com/article/20081018/BUSINESS01/810180305

GM is confident it can manage Chrysler brands
Analysts still have concerns

BY TIM HIGGINS and KATIE MERX • FREE PRESS BUSINESS WRITERS • October
18, 2008

As General Motors Corp. executives work on what a possible merger with
Chrysler LLC would look like, they apparently are not discouraged by the
idea of adding more brands or dealers to the automaker's business, key
factors that analysts have been criticizing.

If a merger is consummated, Chrysler's brands would become just like
Chevrolet, Pontiac and Buick, people familiar with the situation tell
the Free Press.

Conflicting brands could be dealt with in a few years after this
industry turmoil has passed, one of these people added.

Another concern raised by analysts and other observers regards the
addition of 3,500 Chrysler dealers into GM's already over-dealered
network.

One person told the Free Press that those "excess dealers" would cost GM
nothing in the short-term and that some -- if not many -- will fail on
their own anyway.

Such a combination and digestion strategy would be in line with GM's
origin and its 100-year history of buying other brands and car companies
to provide a product for every purse and purpose.

There is no certainty yet that any deal will come to pass. Smaller
ventures or deals with other automakers could be pursued. But a
straight-out combination of operations is the assumed model for GM's
team, led by President Fritz Henderson and Ray Young, his chief
financial officer.

Cerberus wants a stake in a combined GM-Chrysler and could get a larger
stake in GM's financing arm, GMAC. Cerberus already owns 51% of GMAC.

A person briefed on the talks said Cerberus wants to keep a stake in a
combined automaker to ensure its GMAC lending business is tied to an
automaker when the auto industry rebounds down the road.

Chrysler, GM and Cerberus are mum about any potential deal.

Cerberus acquired majority control of Chrysler last year from
then-DaimlerChrysler in a $7.4-billion deal that involved Daimler
spending money to get rid of its U.S. unit.

Since then, the U.S. auto industry has seen tremendous sales declines in
part because of high gasoline prices and now turmoil in the financial
markets that has made getting credit difficult.

The Wall Street Journal has reported that GM hopes to have a deal by the
end of the month.

Several analysts have speculated that GM is interested in Chrysler in
part because of the Auburn Hills automaker's supposed pile of cash.
Chrysler has said that it ended June with $11.7 billion in cash and
marketable securities.

GM, meanwhile, is burning through more than $1 billion in cash a month,
and analysts are cautioning that the automaker could run out sometime
next year.

Meanwhile, GM executives see billions in cost savings that could be had
from a merger with Chrysler. The idea being that GM could pick the best
of the two companies, keep the sales revenues and ditch the redundant
fixed costs.

A person briefed on the strategy said GM is particularly interested in
Chrysler's Jeep brand and minivans. There is even some interest in the
Chrysler brand, this person said.

Others are not so sure.

"A longtime, frequent criticism of GM is that they've had too many
brands out there, so pulling in a few more seems to be contrary to what
they've been espousing for a while," said Joe Magyer, senior analyst
with Motley Fool.

Kevin Tynan, an analyst at Argus Research, also sees little gain for GM
by adding Chrysler, Dodge and Jeep brands.

"You're not getting anything global from Chrysler," he said. "I fail to
see what the value is in those three brands. Jeep's not even worth what
it was."

Lincoln Merrihew, an industry analyst with TNS Automotive, said a merger
could result in savings but it could be 10 years down the road.

"It's extremely expensive," he said of merging auto companies. "You're
buying out dealers, you're merging brands, you're paying the staff to go
away, white-collar, blue-collar. It's a short-term expense with a
long-term gain."

He expects that a merged GM-Chrysler would work to consolidate its
dealer body over time. GM has 6,500 U.S. dealers.

Auto dealers in general are struggling across the country, especially
dealers selling Detroit vehicles.

Steve Girsky, a former Morgan Stanley analyst and adviser to GM Chief
Executive Officer Rick Wagoner, said in 2007 that two-thirds of
domestic-brand dealerships needed to go before the remaining stores
would be as profitable as import-brand dealerships.

National Automobile Dealers Association Chairwoman Annette Sykora said
last week that the nation's troubled economy could contribute to 700
dealers going out of business this year.

 

GM being able to "manage" such a merger is really Alice In Wonderland
thinking.

The World According to TARP
http://tinyurl.com/5pdwzo

 

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