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GM and Chrysler Pushing for Merger

Hydrogen

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Big changes possible in the North American auto industry. This may have big implications for Ontario.


GM, Chrysler pushing for rapid deal: report
Sat Oct 18, 2008 8:07pm EDT


DETROIT (Reuters) - U.S. automakers Chrysler LLC and General Motors Corp are pushing for a quick merger deal ahead of the U.S. presidential election as sales continue to plummet and they cannot gain access to credit, a Detroit newspaper reported on Saturday.

According to The Detroit News, senior executives at GM and private equity group Cerberus Capital Management -- which bought an 80.1 percent stake in Chrysler from Daimler AG for $7.2 billion in August 2007 -- are keen to wrap up talks before both automakers are weakened further by a sluggish U.S. economy.

Both companies have been losing money. Analysts have estimated that GM is burning through at least $1 billion per month. The credit crunch and the economy have made major banks reluctant to lend to the industry.

A Chrysler spokeswoman said the company would not comment on the newspaper report. GM officials did not respond to a request for comment.

Both parties are racing to conclude a deal before the election, which is 17 days away on November 4.

There has been speculation within the industry and among analysts that if Detroit's automakers face failure, they may seek a bailout from the U.S. government along the lines of the recent $700 billion package for the financial sector.

It is unclear whether the government would support such a rescue package, but both presidential candidates -- Democratic Sen. Barack Obama of Illinois and Republican Sen. John McCain of Arizona -- may be more likely to promise help for the industry before Americans head to the polls.

The U.S. auto industry accounts for thousands of jobs in Michigan and Ohio, and the latter remains a key battleground state in the upcoming election.

The newspaper report said under one possible scenario, GM would absorb Chrysler to get hold of its cash stockpile -- $11.7 billion on June 30 -- then shut down some of its brands and car dealerships in order to cut costs dramatically.

http://www.reuters.com/article/newsOne/idUSTRE49H1IT20081019
 

Hipster Duck

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Wow, this is very opportune! Let's hear it for General "Biggest recipient of corporate welfare in world history" Motors!
 

Prometheus The Supremo

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Wow, this is very opportune! Let's hear it for General "Biggest recipient of corporate welfare in world history" Motors!


no such thing as capitalism. it's an american dream, the american dream. dreams aren't real.

and they called us socialists because of our healthcare system. pfffffft.
 

Dichotomy

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What's good for General Motors is good for the country.

Er, wait.

Sadly, that is still true. What is happening to the Auto industry in North America is nothing short of a seige. Interesting that nowhere else in the world does Japan Inc have the same market penetration that they do in North America. (Toyota and Honda don't even rank in the top 5 in sales in either Europe or South America.)
If Detroit fails, North America is going to be relegated to Third World status, given time. I can just see Obama going to the Prime Minister of Japan and begging him to build tanks and missles for the Pentagon. So much for the 'arsenal of democracy.'

Personally, I don't see the GM-Chrysler thing being anything more than smoke and mirrors at this time. GM does not need more brands, that's for sure. There may be some synergy to suddenly having 36% market share again, but that party would probably leave one helluva hang over.

Then again, Bob Lutz used to run Chrysler, so if anyone has any inside info, it would be him. This could be more about posturing: giving Washington the impression no stone is being unturned, so to speak.

Then again, if it is true that Chrysler has $12b in cash reserves and that investment banks are unhappy with Cerberus' Chrysler operations, it might make sense that Cerebrus take the remaining 49% of GMAC in a swap that would give GM controlling stake in Chrysler. There could be some synergy in that.
We are living in interesting times, to be sure.
 

kEiThZ

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IMO, Chrysler and Ford are a better fit. GM just has far too many brands under its umbrella.
 

Hipster Duck

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Sadly, that is still true. What is happening to the Auto industry in North America is nothing short of a sige. Interesting that nowhere else in the world does Japan Inc have the same market penetration that they do in North America. (Toyota and Honda don't even rank in the top 5 in sales in either Europe or South America.)

If Detroit fails, North America is going to be relegated to Third World status, given time. I can just see Obama going to the Prime Minister of Japan and begging him to build tanks and missles for the Pentagon. So much for the 'arsenal of democracy.'

There is absolutely no way that the US government will spend its $700 billion annual defense budget on hardware made overseas and no way that defense contractors would be foolish enough to outsource for those reasons.

Despite what neocons (like yourself) preach, the American economy is heavily statist. At its core it has maintained a 70 year-old experiment in Keynesianism predicated on highly subsidized sprawl-based real estate development and an ever-ballooning military industrial complex. There is no way that GM, a company that was unique in that it was such a large player in both of these American economic interests, will be allowed to fail.
 

Prometheus The Supremo

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There is no way that GM, a company that was unique in that it was such a large player in both of these American economic interests, will be allowed to fail.

a guest on the daily show the other day said it best "communism (or socialism, can't remember which) for the rich and capitalism for the poor".

when you're big, you might crush alot of people if you trip and fall so the government holds you up by giving you crutches made from tax money in hopes that you will get better soon and learn to walk on your own. of course, it doesn't bother me that much that vital companies are saved with taxpayer dollars (if the well being of the nation depends on it + other factors) but i sure love rubbing it in the faces of right wing nut jobs who think canada is too socialist just because we provide a public healthcare system. :)
 

Prometheus The Supremo

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a problem with american cars is the design aspect. america used to be great at solving problems. in the past, if america couldn't get it done, they'd get the top scientists, researchers, architects, etc. from other countries to help get it done. what they need to do is spend some coin and get the big brains from foreign auto manufacturers to go work on american cars. if american car companies make cars that people can't afford to maintain due to fuel usage or they don't like the designs, corporate welfare won't do a thing in the long run to fix the real problem.

you can really cripple a foreign corporation if you steal some of its brains and at the same time implant those very stolen brains into your own corporation. all you need is the right incentive to get those brains.

zombie manufacturers! needs brains!
 

kEiThZ

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It's not design per se. What they lack is foresight. What is happening now is a re-run of the 70's. The [Japanese] stuck to fuel efficieint cars while the yanks pumped out mini-tanks. When OPEC struck, the Japanese gained a massive natural advantage with their product. Apparently, the big three didn't learn from that era. Corporate Average Fuel Economy actually declined through the 90s. And now in the era of high fuel prices they are playing catch up again. It's not design. What they lack is foresight, long-term planning and steady leadership that looks beyond the next quarter.

As to their status as a defence supplier, GM hardly provides anything of value to the US military and security services that could not be procured elsewhere. There was a time when they were the preferred automotive supplier, but that era has passed. They are not critical to the security of the United States. General Dynamics maybe, but not General Motors.
 

Hipster Duck

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As to their status as a defence supplier, GM hardly provides anything of value to the US military and security services that could not be procured elsewhere. There was a time when they were the preferred automotive supplier, but that era has passed. They are not critical to the security of the United States. General Dynamics maybe, but not General Motors.

The US government could easily make a defense-related case for funding GM. There is certainly some wing somewhere of the GM octopus that could be used or rejigged to benefit military operations. It would be a more clandestine form of corporate welfare than a bailout and one that would be more palatable to House Republicans (and Democrats from Michigan).

Also, please refrain from using words like 'Jap'. Consider using the word "Japanese", instead.
 

Whoaccio

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The one thing that always gets me about American cars is that they are, surprisingly, popular in Europe. Walking around Toronto, I easily see more Hondas & Toyotas than Chevys or Fords (and when I do see one, 7/10 times it is a land yacht). Walking around London though, I am perpetually surprised by how popular cars like the Ford Focus are (UK's best selling car). If you start to add in American subsidaries like Opal & Vauxhaul, American cars are pretty damn popular in Europe. GM's market share in China is growing fairly rapidly there as well. The diesel engines for the B-Zero joint venture (Toyota Aygo, Citroen C1, Peugot 107) are all made by Ford.

I think GM/Ford/Chrysler just royally screwed up their North American operations. Domestic car makers haven't even bothered on the "car" market since the 1980s. Sometime in then, they figured out that higher margins would be found in selling Bismarckian SUVs to soccer moms. To their credit, it actually worked pretty well throughout the 1990s. Clearly they didn't really think it through strategically. Apparently they didn't have a contingency factor for a.)competition in the Yamato category of cars b.)fuel price might go over 100$/barrel. (yes, I realize oil is ~70$ now, but we also happen to be in a global recession)

The future of automobiles is low margin products. I don't know who the majority shareholder of GM/Ford is, but I would be throwing a conniption fit. GM needs to trim most of it's brands and dealerships. It is re-badging gone insane. Who the hell does Pontiac even compete with? Trim at least 40% of it's dealerships. Offshore as much of the production as possible to Vietnam and as much of the assembly as possible to Mexico. I'm pretty sure GM just keeps some of it's plants open to extort massive subsidies (damn you McGuinty!).
 

afransen

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There's not real reason for the jobs to leave Canada. What the car companies should consider is some good old fashioned union busting. Out-source assembly to third-party firms who operate out of existing plant. If one of the third-party operators is unionized, when the contract comes up for renewal they will be uncompetitive and the union goes bye-bye.

Frankly, unions aren't that helpful when they are merely guaranteeing that the jobs will not be there in a sustainable way.
 

Edward Skira

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Personally, I don't see the GM-Chrysler thing being anything more than smoke and mirrors at this time. GM does not need more brands, that's for sure. There may be some synergy to suddenly having 36% market share again, but that party would probably leave one helluva hang over.

The merger has nothing to do with more brands. Cerberus Capital Management, which owns Chrysler, is looking for a way out of a bad investment. Chrysler has a lot of cash which GM desperately needs. A deal, if worked out, would be a win win for both, at least that's what they think.
 

Brandon716

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America is into big time socialism when it benefits large corporations. Technically that's fascism. A matter of fact, even in good years you can get all kinds of freebies for corporations. You can incorporate a small business, get all kinds of free capital flowing, bankrupt the whole thing without even trying and take the extra cash for yourself.... and be considered an honorable, God fearin', patriotic American. But government money going to benefit individuals is tantamount to evil.

On another note, who in their right mind would WANT Chrysler with all its baggage, outdated vehicle technology, and problems?

Any extra cash they may have will be burned through in GM and the baggage left will create even more problems for them.
 

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