Chrysler for Sale?

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.

One thought on “Chrysler for Sale?

  1. Could diesel fuel help?

    We are selling diesel French fries oil for fuel here in Washington State now. Did the union hear about this one?

    dcat still @it | Homepage | 02.21.07 – 8:13 pm | #

    When this junk first hit the airwaves, everyone in the lobby said “it must be UAW negotiation time.” I don’t think there is any question this is the number one objective – break the union.

    Of course, Bob Lutz (former Chrysler President before the “merger of equals”) is Vice Chair at GM and Chairman of GM North America. So who knows, maybe there is some merit to all this.

    I’d like to know as my Dodge lease is up soon.
    Jay | Homepage | 02.22.07 – 3:57 pm | #

    dcat – When the Jeep Liberty still had a diesel engine, it was filled with bio-diesel when it rolled off the line. I think that when the diesel engine gets put in the Grand Cherokee, it will also be filled with bio-diesel. No word on the widespread distribution of used cooking oil…

    Jay – Every year that the contract comes up, you can count on management starting to spread doom, gloom, and rumors about the demise of the company and how the Union needs to suck it up. Of course, the bonuses of the managers reflect how bad they stuck it to the Union. Example – If things were so bad last year, then why did the DCx Board of Directors average $40 Million in bonuses?
    Tom | Homepage | 02.22.07 – 5:03 pm | #

    I agree with you, Tom. Your buddies Crazy Politico and Shoprat say all of this trouble is from the greedy UAW. How can Toyota pay their workers more and compete? I know there are legacy costs, but how bad can they really be? Could it be that Mgt. has not been fully funding the pension plan to fatten their bonuses?
    Tim | Homepage | 02.22.07 – 5:13 pm | #

    Tim – The UAW (to which I belong) does share some of the blame, but then the worker usually gets hosed because of bad management decisions. The pension fund should be funded according to Federal & State regulations, but those have been changed over the years. Legacy and health care costs are the biggest chunk out of the profits on each vehicle. My guess is that Toyota’s health care plan puts a bigger deductible on the worker.
    Tom | Homepage | 02.23.07 – 2:55 pm | #

    Time will tell what will become of chrysler, but look for your buyer out of AZ or a non auto company.
    Tom C | Homepage | 02.23.07 – 9:08 pm | #

    Um… I guess I should tell you now…

    I have a BMW Z4 and a RX300 Lexus. I don’t wanna put that bio crap in my cars!!!
    dcat still @it | Homepage | 02.25.07 – 3:33 pm | #

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