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GM-Chrysler Merger Would Be Dreadful

The coupling of the largest automaker worldwide and a pretty ill automaker would be dreadful said analysts. The tie-up between General Motors Corp. and Chrysler Group, which is intended to alleviate both their standing in the auto industry, may not serve the purpose of bringing back the glory days of these car makers after all. As a fact, other analysts see it as a tough pill that could lurk the Detroit automakers to an ill-timed demise. Talks about the coupling started its acceleration on February 14th, when DaimlerChrysler announced that the company is considering all options available to aid ... read more

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Talks about the coupling started its acceleration on February 14th, when DaimlerChrysler announced that the company is considering all options available to aid the laid up Chrysler Group. That day also triggered several speculations about the possible options available. Other critics in the industry think about Carl Valdiserri, a German steel magnate from Dearborn, as a potential purchaser.

Valdiserri, an institution in the steel industry, have been through the roughest terrains in the trade. In fact, Rouge Industries Inc., one of his most precious possessions, has faced bankruptcy in 2003. As such, he spent several days trying to find individuals or entities that could purchase said assets Henry Ford has established at his potent Rouge. But no one wanted the assets except to purchase them to eradicate rivalry.

"Every offer I know of shuts all or part of the place down," he told me then, as Russia's No. 2 steelmaker, OAO Severstal, was in the process of acquiring Rouge. "It's a damn shame we have to go foreign to get investment commitment to save these American jobs. We couldn't get a $4 loan to keep this business running. It's been written off."

People at Chrysler could feel the sting of gutting through the turnaround plan of the company. Rumors suggest that Detroit's No. 3 automaker should be acquired by GM - its crosstown rival. That fact alone could mean disaster not only to the workers in particular but to the entire town as well. It could also mean forthcoming trouble in connection with the largest automaker's vision to stay focused and to systematically remedy its own problems.

Michigan's job cuts pose a great risk to the country's financial stability. The production of fresh product lines would also be adversely affected. They would die young much to the disadvantage of the long-suffering auto dealers. Further, there is a probability that tax-generating real estate would stand empty.

"Anything's possible, but this one seems unlikely," said John Casesa, a longtime auto analyst and managing partner of New York-based Casesa Strategic Advisors LLC pertaining to the GM-Chrysler possible merger. "It would increase exponentially the challenges GM faces in turning around the company. These two companies have an immense amount of overlap in people, plants, dealers and products, and there'll be very considerable cost in working through all that."

David Cole, the chairman of the Center for Automotive Research in Ann Arbor, said UAW President Ron Gettelfinger, a member of DaimlerChrysler's supervisory board, may be pushing discussions with GM. "I don't think Chrysler is going to stay in DaimlerChrysler," Cole said. "If I were Ron, I would like to have, probably, an American company be the buyer versus a Chinese company or a French company or a private-equity group." The situation is getting more and more intense as the day go by. Even the most trusted Volvo timing belt could not withstand the heat of the talks circulating. They make every one rattle.

However, analysts added that it would be unwise to assume there would not be any kind of tie-up between GM and a Chrysler looking for its moorings.

Looking at the most successful automakers like Toyota, BMW and Honda, analysts could decipher that they have grown organically and not through financial engineering and acquisition. Indeed, they have developed using more simplified operating systems in the manufacture and production of their lineups. They have fewer brands so they could focus more on quality, goodwill and even to the minutest details expected of them. So the query now is - why would GM intend to build rival vehicles to struggle against itself?

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