The buzz around Detroit these days is that DaimlerChrysler (DCx) is putting the Chrysler Division up for sale, and that GM is interested. The rumor also includes the juicy teasers that Nissan, Toyota, and Hyundai are also looking at buying the automaker. I personally don’t think any of this is going to fly.
But what if GM really does want to buy Chrysler? What would they want out of the deal?
Well, the Jeep brand-name for one. That was one of the reasons that Chrysler bought AMC way back when. But that would directly compete against the Hummer series (especially the H3). Sure, Jeep has brand-name recognition, but GM has spent millions in promoting the Hummer as a superior vehicle. I can’t see GM throwing away that much money, but then again, they’ve thrown away more on stupid projects that never saw the light of day.
Another thought would be Chrysler’s minivan market share, but it’s hard to believe that GM couldn’t drop enough money into the pot to come up with a minivan that would beat all comers. They just haven’t done this because there just isn’t enough justification for the investment.
The last thought would be the design. Chrysler’s designs are breathtaking, definitely different than what Ford or GM currently has. But if GM wants the designers, they can hire them away from Chrysler with a lot less money than what it would take to buy the company (rumored to be $5 Billion before liabilities).
On the downside is that GM is closing plants left and right. Chrysler’s recently announced restructuring plan is accelerating the cuts already planned. And if the two do merge, thousands from both companies will be out of jobs. And I guarantee that would not be good for either company – whatever brand loyalty there may be could evaporate in the wind, and investigations by the government and others would be intense.
No, I just cannot see GM buying Chrysler – just too much flak if the deal goes through. Could you imagine the amount of fallout from the Union, government, and employees of both companies? Not worth the risk, in my opinion.
What about the other companies? Let’s take a look at a couple of these companies.
Toyota has enough spare cash lying around to buy both Ford and GM, and then drive Chrysler out of business through sheer marketing. But they don’t want to buy any American plants or companies. They are doing just fine on their own without having to deal with the legacy costs of these companies, not to mention dealing with the Unions. They’re firing on all cylinders – why muck things up now?
Nissan recently tried an alliance with GM. Things fell apart, and Nissan is probably more interested in solidifying their positions in the various markets rather than stir things up.
Hyundai is an interesting company. They may want to buy Chrysler to help break deeper into the US market. But again, there are those legacy costs, and they may not have deep enough pockets to put up the money. I seem to remember that some years ago, Hyundai was nearly bankrupt, but my memory has faded somewhat.
So what’s left? Besides the above rumor & speculation, there is a theory that this is a ploy by person or persons unknown to jack up the stock prices of both GM and DCx (and if this is truly the case, then the SEC has cause to jump in and nail a few people). But there is just one more final thought.
The contract with the Union is up this year for Ford, GM, and DCx. What if this is just a ploy to get DCx’s Union to concede items at the bargaining table? DCx earlier tried to strong-arm the UAW to reduce health care benefits to the level that was conceded to Ford & GM. But since DCx was fairly profitable at the time (and paid the executives pretty healthy bonuses), that request was promptly rejected. So now the semi-subtle hint is now out there that if the UAW doesn’t play ball on DCx management’s terms, Chrysler will be sold to the highest bidder (and let the bloodletting begin).
Well, that’s my take on this rumor. It will be most interesting to see what transpires in the next couple of months.