GM and Chrysler in talks to merge?

[B O N Y]

G.M. and Chrysler Explore Merger

General Motors is in preliminary talks about a possible
merger with Chrysler, a deal that could drastically remake
the landscape of the auto industry by reducing the Big Three
of Detroit automakers to the Big Two.

The talks between G.M. and Cerberus Capital Management, the
private equity firm that owns Chrysler, began more than a
month ago, and the negotiations are not certain to produce a
deal. Two people close to the process said the chances of a
merger were "50-50" as of Friday and would most likely still
take weeks to work out.

 

[dbk]

Yeah right. Typical rumors. If it matters, Cerberus has been relentlessly peddling Chrysler for months, but otherwise, these companies meet constantly to explore strategic alliances and 99.9% of the time it results in nothing.

If anything ever did pan out it wouldn't be a "merger", it would be Cerberus running for the hills away from Chrysler's obligations and GM (barring justice department intervention) getting rid of a competitor while making sure the supply base doesn't collapse under the pressure of Chrysler going kaput.

 

[STUNTS]

so..... this thread is only for the Heads of State??

 

[AJB]

This was big news in Detroit tonight. Not sure how GM would absorb Chrysler. Jeep is really the only non-overlapping line.
Cerberus is trying to either sell it all or by pieces IMHO>
AJB

 

[BlackICE]

http://biz.yahoo.com/ap/081011/gm_chrysler_merger_talks.html

 

[SYCO GT]

Anyone have insight on the short term outlook of the Blue Oval?

 

[BlackICE]

Anyone have insight on the short term outlook of the Blue Oval?

IMHO, unfortunately, not good and the long term is worst!


Don't shoot the messenger.

 

[dbk]

Anyone have insight on the short term outlook of the Blue Oval?

Not nearly as bad as GM or Chrysler, but it's rough times for anyone trying to sell anything.

Ford Motor Co. Chief Executive Officer Alan Mulally spoke Friday about the decision, during the middle of a sweeping economic crisis, to replace retiring Chief Financial Officer Don Leclair with Lewis Booth.
QUESTION: Why are you making this change in management right now?
ANSWER: Well, Don's had a great career and we decided we can accommodate his retirement now. We have a great succession plan with Lewis Booth able to join the team.
Q: Was Leclair under a lot of stress in the current environment? Why leave now?
A: Again, he's had a great career. We're all working hard.
He stated he wanted to spend a little more time with his family and, you know, relax a little bit. And that's pretty understandable.
Q: Your share price is close to $2. Do you think shareholders are acting rationally in their assessment of Ford stock? Why are Ford shares worth buying?
A: I think the consumer confidence has really been hurt and that's why we're seeing the response across the stock market, not just Ford.
To your other point, I think clearly that the response we've gotten over the last several years about our plan to focus on the Ford brand and leverage our global assets, be in all of the markets, move to common platforms, the whole One Ford strategy has been appreciated by everybody.
I haven't heard anybody saying that we're not doing the right things for the long term. But really we have a hair-trigger strategy with the economy.
Q: What is your assessment of your cash position for the next 12 to 18 months?
A: I think we're being very disciplined in our cash management. ... We went to the market early, over a year and half ago, and we decided to borrow enough and also have a cushion in case the economy degraded even further. And in hindsight, that was very prudent.
Q: Credit availability seems to be a big issue for your suppliers, your consumers. How concerned are you about your consumers' ability to get credit to buy cars and trucks?
A: Well, I think we are very concerned about the availability of credit not just from the automobile purchaser, but the availability of credit for our economic system.
Banks to banks and banks to industry, everything has tightened down, and so the biggest concern here is that it will contribute to a slowing economy, which will hurt all of us. ... I have a lot of faith in the secretary of the Treasury and the Fed and their fiscal and monetary policy.

 

[dbk]

I also just want to point out a couple things on why Ford is in a distinctly different situation than GM or Chrysler.

-Ford has access to $38 billion dollars in cash. Whatever people said when they did it, leveraging all their assets for access to money a few years ago was an extremely prudent idea now that cash is hard to come by.

-That $38 billion will not dry up in the next 18 months under any circumstances. They aren't going to burn $3 billion a month and if they do, we've got bigger things to worry about in the U.S than Ford.

-By the time 2010 rolls around, Ford will be selling the new Fiesta globally, the European platform Focus globally, and shortly thereafter the Mondeo globally, and the Kuga globally. The last two will be in the U.S as the Fusion and the Escape according to word around town.

-These are the best, most fuel efficient vehicles Ford Motor Company has ever sold. Better than the efforts of their crosstown rivals, and more importantly, already critical and commercial successes in the European markets. I have no idea if they can achieve significant enough cost savings to make the small car market in the U.S a profitable enterprise, but you can't tell me the economies of scale realized through global production aren't better than nothing.

-Kirk Kerkorian dumped over a billion dollars into his Ford position in the last year. He's lost about $700 million on that investment. It's hard to imagine a scenario in which Kerkorian abandons his investment when he has $16 billion on hand with which to increase both his influence and his investments chances of success. Especially given the very real spectre that Chrysler will not survive the next 18 months, lifting at least some pressure on the market.

-They will begin realizing savings on their labor deal with the UAW in 2010. Again, so long as their available cash isn't burnt by then, this is another positive.

It's not all roses and good times, but Ford has aggressively right-sized the business over the last 5 years, they've got a raft of significant global product finally hitting the U.S, and they've got access to a ton of cash. They could, and in my opinion likely should, get rid of Volvo. It is a money loser, and it will be so long as the dollar remains weak and they build cars in the EU (i.e forever). Their stake in Mazda is about 30%. They could easily get additional cash by selling stakes in these brands.

People errantly talk Detroit as if it's one giant organic monster that has no differences (especially ironic given the ceaseless negative by analysts in New York who have all, at this point, cleaned out their desks at their now-defunct employers). Ford currently has Ford, Lincoln, Mercury and Volvo. Compare this to GM who has GMC, Chevrolet, Buick, Pontiac, Saturn, Cadillac, Holden, Hummer, Saab, Opel, Vauxhall. Chrysler cannot sell cars globally and they have the weakest product lineup and quality of the the three. Anybody looking to take over Chrysler would have to be enamored with their three reasonable assets in the mini-van, truck, and Jeeps. Not quite the right time in the market for those products.

I wish them all the best, as the erosion of manufacturing capabilities in the U.S is a serious issue, but I know which one I am betting on.

 

[dbk]

Chassis: Simply Ingredients, Exemplary Results
The Fiesta has a simple strut-type suspension setup in front and a relatively rudimentary beam axle in the rear. Chassis tuning is exemplary, easily beating the car's Japanese competitors. The Sport model features the usual stiffer springs and dampers, a 10-millimeter-lower ride height (less than one-half inch), and more torque feedback for the steering, for better feel. The brakes are vented discs at the front, drums at the rear. ABS and stability control are standard. Wheel sizes range from 14 inches in diameter to 15, 16, and 17 inches.

The Best-Driving Car in the B-Segment
In base form, the Fiesta provides a very compliant ride and quite good body control, especially side-to-side. The brakes are responsive, with good pedal modulation, but there is some minor pitch and dive under braking. The steering is among the best of any small car's; very communicative and accurate and full of feel, such that we always felt confident tossing the car into a corner on the hilly two-lane roads that we drove between Grossetto and Sienna, Italy. The thin-rimmed steering wheel is also nice, as it feels good running through your hands.


As impressive as the base car is, the Fiesta with the Sport package is a revelation. The car is incredibly tied down, the steering has even more feel, and body control is remarkable. We had a blast in a two-door, gasoline-engined Fiesta Sport on an early-morning run along a road that twists its way up and down a mountain near Sienna. The car was completely composed, never put a foot wrong, and was downright fun to drive. With a curb weight of approximately 2553 pounds, the Fiesta reminded us of the rewards of driving a modestly powered but properly tuned, lightweight car. While we were blasting along that road, it occurred to us that we were having more fun than we would be in a high-powered sports car or grand tourer. The Fiesta, of course, is front-wheel drive, not rear-wheel drive, but understeer is minimal and it's easy to push the car through long sweeping curves and to make minor corrections to the steering wheel without upsetting your intended path.


Ford's North American engineering team is still pondering whether to bring the Sport package to America, but if they don't offer it as an option, they are fools. It shouldn't be standard spec, of course, because most Americans will be happier with the base suspension calibrations, but it should certainly be available to those who want it.

 

[BlackICE]

Is the jobs bank eliminated in 2010? The jobs bank is the dumbest thing I heard of. Shutdown a plant and pay all the workers 95% of full salary to "sit around." I wish I had that deal!

 

[B O N Y]

Beyond merger talks, GM eyes federal funds
Mon Oct 13, 2008 7:07am EDT

By Kevin Krolicki and John Crawley

DETROIT/WASHINGTON (Reuters) - What's good for General Motors Corp is good for the country.

When former GM chief executive Charles Wilson told the U.S. Senate that GM "goes with the welfare of the country" in 1953, the automaker had more employees than the populations of Delaware and Nevada combined. Today, it has 266,000 employees worldwide and has seen its market value plunge to below $3 billion from nearly $20 billion in 1953.

That defining catchphrase of American business will be tested as never before as GM enters the week with its stock at a near 60-year low and the prospect of asking the U.S. government for funding, which analysts say is crucial to its survival and to any consolidation in the struggling auto industry.

"This could certainly be major for GM because it needs cash more than anything, and this could stave off the bankruptcy risk," said Erich Merkle, an analyst with Crowe Horwath.

GM has had preliminary talks with both Ford Motor Co and Chrysler LLC in recent months about the potential for mergers, people familiar with the talks have said, as the punishing downturn in auto sales forces all three companies to rethink their businesses.

GM's talks with Ford broke off, and Chrysler negotiations got hung up on the question of how much value the No. 3 U.S. automaker had lost while owned by private equity fund Cerberus Capital Management.

BURNING QUESTION

Beyond the recent round of merger talks there looms a burning question: How soon can the U.S. automakers get federal funds and will it be enough to save an industry that is burning cash and facing uncertain prospects for a turnaround?

GM, Ford and Chrysler are all eligible for a share of $25 billion in low-cost federal loans to retool factories in order to build more fuel-efficient vehicles.

But the disbursement of those funds is expected to take months as regulators put rules into place that will govern distribution of the money.

As of late Friday, Detroit's allies in Congress were focused on getting the Bush administration to accelerate the availability of that $25 billion.

The package was approved by Congress in September and lawmakers have pushed to get the money flowing by year's end. However, that time frame is ambitious, considering the regulatory framework that must be established first.

More immediately, GM could seek a direct loan from the U.S. Federal Reserve, business publication Barron's said on Saturday.

The Federal Reserve and the Treasury Department declined to comment on Sunday on whether the U.S. Central Bank would grant a direct loan to GM from the Fed's discount window, its "lender of last resort" facility for financial institutions.

Such a move would allow GM to borrow at 1.75 percent alongside banks that have turned to the Fed discount window for record borrowing of some $420 billion a day in the most recent week because of the panic in financial markets.

Under the $25 billion package, GM could borrow at a market rate near 4.5 percent. By contrast, GM's bonds were trading at near a 20 percent yield last week.

"In this period of continued uncertainty in the markets, you really can't rule out anything," GM spokesman Greg Martin said.

A person familiar with implementation of the recently passed $700 billion federal financial bailout said the law is broad enough to allow the Treasury to purchase equity in any institution that it views as critically important.

GM has said that filing for bankruptcy protection is not an option.

WATCHING THE CASH BURN

With some $10 billion in outstanding debt, GM is the fourth-largest distressed borrower in U.S. corporate markets.

Including GM's 49 percent share of the outstanding debt of finance company GMAC, it shoots to the top of the distressed debt list, according to data compiled by Standard & Poor's rating agency. GMAC, now 51 percent owned by Cerberus, had $24 billion in outstanding debt.

Analysts have started adjusting their projections of how quickly GM is running out of cash.

GM ended the second-quarter with $21 billion in cash and has subsequently fully drawn down a $4.5 billion revolving credit facility. GM has said it needs to maintain from $11 billion to $14 billion of cash to fund its far-flung operations.

The automaker has been burning through about $1 billion of cash per month, but analysts see that increasing if markets outside the United States continue to slow. Sales outside the United States now account for about 60 percent of GM's total sales.

Barclays Capital analyst Brian Johnson warned last week that GM would have to raise $10.3 billion for the remainder of this year and all of 2009 from an earlier estimate of $7.3 billion because of the decline in global sales.

Some analysts say GM remains too big for the government to let it fail.

"A bankruptcy by GM would be devastating to thousands of employees, suppliers -- it's not just GM that would get pulled into that hole," Crowe Horwath's Merkle said.

GM's shares closed at $4.89 on Friday on the New York Stock Exchange.

 

[dbk]

Is the jobs bank eliminated in 2010? The jobs bank is the dumbest thing I heard of. Shutdown a plant and pay all the workers 95% of full salary to "sit around." I wish I had that deal!

I'm not sure if it is completely eliminated but it has already been greatly reduced. Honestly though, that's just one of the things that illustrates the philosophical gap between the rest of the working world and the UAW. It doesn't actually do much to the bottom line in the context of the total unionized labor package. The bigger cluster**** was all the crazy work rules and job classifications that prevent any kind of enhanced efficiencies. Those have decreased as well as the enormous wage and health care costs for new workers.

I had a friend who interned at Wayne Truck while we were in college and he once got cornered and yelled at by a couple UAW guys because he moved a tray of bolts from one folding table to the next. Literally. 10 feet over. And he wasn't UAW and that wasn't his job. Likewise, in the early 80's when my Dad first worked in Dearborn he had a formal complaint filed against him because he moved a file cabinet in his office that prevented efficient ingress/egress and, again, that was not his job and he was not UAW. Insanity.

 

[Sinovac]

Dave,

Tell the powers at Ford to make sure they bring the Focus RS to America.

 

[dbk]

Dave,

Tell the powers at Ford to make sure they bring the Focus RS to America.

I'm with you 100%. I'm certain the ST will be here shortly because there are several running around town, but I'm only holding out hope for the RS. That is a very expensive Focus. You figure it's in the high 20's in the UK. That makes it a $50k car here. Ouch. The day it gets here is the day I have a new DD.

 

[B O N Y]

DETROIT (Reuters) - Shares of General Motors Corp jumped almost 18 percent on Monday after reports the No. 1 U.S. automaker had been in merger talks in recent weeks with smaller rivals Ford Motor Co and Chrysler LLC.

Analysts were skeptical that GM could achieve substantial savings from a merger.

But a deal with Chrysler might allow the top U.S. automaker to boost its cash holdings, reassure consumers that it was not going out of business and give it bargaining power to seek new concessions from the United Auto Workers union, they said.

Shares of GM, which had traded near 60-year lows last week, jumped to $5.75 in pre-market trade on Monday, up from a close of $4.89 on Friday. The gains came amid a rebound in the broad market tied to steps by the U.S. government and others to stabilize the banking system.

GM and Cerberus Capital Management have had discussions about a deal that would combine the No. 1 and No. 3 U.S. automakers, people familiar with the talks said over the weekend.

Those talks hit a snag over the question of how to value Chrysler, the sources said. Cerberus bought an 80 percent stake in the automaker for about $7.4 billion from Daimler AG in 2007, but auto sales have dropped sharply since.

In addition, GM and Ford had earlier talks about a potential merger with the No. 2 U.S. automaker but those discussions broke off without nearing a deal, according to a person familiar with those talks.

JP Morgan analyst Himanshu Patel said the benefits for GM would be greater from a deal with Ford, but said there could also be some gains from a merger with Chrysler.

Cerberus had proposed swapping Chrysler's auto operations for the 49 percent in finance company GMAC still owned by GM. The private equity firm already owns 51 percent of GMAC after it bought the stake from the automaker in 2006.

Patel said GM's stake in GMAC could be worth $3 billion, while Chrysler's auto business "is arguably nearly worthless on a stand-alone basis."

If GM were paid $3 billion in a swap with Cerberus and GM got access to the estimated $10 billion remaining on Chrysler's books, it could mean a boost in liquidity, for GM.

GM has ruled out a bankruptcy filing but faces scrutiny from investors and creditors over its ability to ride out a downturn in auto sales that began in the United States and is now spilling over to Europe and Asia.

"If GM is deemed to be 'saving' Chrysler, GM's leverage with the UAW could rise considerably," Patel said.

The automaker could use that influence to press its major union for new concessions on retiree health care and lower wages for new hires, he said.

Calyon Securities analyst Mark Warnsman said the winners from any deal to combine GM and Chrysler could be suppliers rather than the merged auto companies.

"We are skeptical of major incremental savings resulting from a combination," Warnsman said.

GM might benefit from an acquisition of Chrysler if the deal helped to reassure U.S. consumers about the staying power of its brands.

"The greatest near-term risk to GM, in our view, is that consumers stop buying its products for lack of confidence in, among other things, the warranties behind the vehicles," he said. "By joining with Chrysler, GM could reinforce its market-leading position in the U.S., potentially reducing the risk of lost consumer confidence."

But Warnsman said a combined GM-Chrysler would also "help dissipate the cloud that presently hangs over even the healthiest North American suppliers."

Warnsman said Johnson Controls Inc and Gentex Corp could benefit from a merger of Chrysler and GM.

(Reporting by Kevin Krolicki; Editing by Maureen Bavdek, Dave Zimmerman)

 

[HHGT]

Can someone do a photoshop of an ACR & ZR1. Afterall, they may become siblings.:willy:willy:willy

 

[SYCO GT]

Thanks for the insight gentlemen.

In the words of midnite:

GO BLUE!

 

[dbk]

Another reality: Chrysler's owner, Cerberus Capital Management LP, wants to make a deal -- with anyone -- that will free it from the black hole that is a Detroit-based automaker. Lest there be any doubt, the private equity shop would gladly sacrifice Chrysler, its employees and retirees to GM's corporate ax if it can extricate itself from an industry it never fully understood.



Using the word "merger" to describe a combination of GM and Chrysler is verbal dishonesty of the worst kind. Whole swaths of Chrysler engineering, manufacturing and product development would be collapsed into GM; redundant support staffs would be trimmed; more plants would be closed and more jobs cut; Chrysler communities would be devastated.


And GM would eliminate a competitor in a "neutron bomb" kind of deal that eliminates jobs and the people in them but leaves valued hard assets and, presumably, Chrysler's corporate cash hoard intact. Which is the point.


Chrysler wouldn't be merging with GM so much as be submitted for its own execution. In exchange, Cerberus would assume total control of GM's GMAC finance arm, a business the financial engineers at Cerberus better understand and assume will return someday to normalcy and profitability.


The Big Lie in all this is how disingenuous Cerberus has been since the get-go: Cerberus's commitment to Chrysler, reiterated repeatedly by its hired hands and founder Stephen Feinberg, apparently lasts only as long as they say it does -- that is, long enough for Cerberus to cut its losses and for CEO Bob Nardelli and his top boys in Auburn Hills to reap their change-in-control payouts.


GM needs more brands, more plants and more dealers like it needs another credit crunch. Would the incremental volume of, say, merging Dodge Ram pickups with Chevy Silverados or combining the Chrysler minivan platform with GM's crossovers -- a multi-year undertaking -- deliver revenue worth waiting for? And would it come too late?


GM's directors aren't keen to embrace a Chrysler deal with Cerberus because they realize the remedy for what ails GM won't come from swallowing a competitor. It'll come from buying enough time to survive the imminent shakeout because -- and I wish I could say otherwise -- one of Detroit's Big Three may not.

Daniel Howes' column runs Tuesdays, Thursdays and Fridays. He can be reached at (313) 222-2106

Yup.

 

[skyrex]

I am from Pittsburgh originally and I grew up during the demise of the steel industry. It was very difficult to watch what it did to the city and the population. This is like watching that same type of slow death that I saw in person. Very sad for Detroit and the American car business. However as a city Pittsburgh managed to reinvent itself, so maybe Detroit can as well.