Chrysler says GM merger could be best option for survival

Posted: Feb 19, 2009
Filed under: Chrysler, GM, Industry News

In its restructuring plan submitted to the Treasury late Tuesday, Chrysler LLC said that it believes that the “best option for the U.S. auto industry” would be a GM/Chrysler merger. Chrysler, which is also pursuing an alliance with Fiat SpA, said that consolidation among U.S. automakers and their brands is a strong way to sustain the auto industry.

Chrysler’s restructuring plan called for an additional $2 billion loan on top of its $7 billion loan request. General Motors, which asked the U.S. Treasury for an additional $16.6 billion, did not express any hint of its interest in merging with Chrysler.

Chrysler said it has had discussions about a possible merger, but the talks were taken off the table by GM. The Auburn Hills automaker made it clear that savings from a GM/Chrysler merger would be at least five times more than Fiat deal. It said that a merger between the two automakers would generate at least $36 billion in cash and boost operating earnings by $40 billion.

However, let’s not forget that a GM/Chrysler merger would cost about 35,000 jobs, including as many as 25,000 jobs in Michigan alone. Not to mention GM has shown no interest in a possible merger with another automaker as it looks to cut down brands.

In their plans submitted to the U.S. Treasury, GM said it is looking to cut 47,000 jobs worldwide by the end of this year while Chrysler plans to cut 3,000.

Source: Detroit Free Press

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  • Neil
    I am with you Ivan

    What does the GM in eGM stand for

    I demand to know!!!!!
  • Ivan Gutierrez
    So what exaclty does the "eGM" stand for?
  • Neil
    If Chrysler were a boxer they would have called the fight a long time ago (TKO) if it wasn't for Jeep they would have been dead years ago.

    I say Merge them - then go into Chapter 11 and basically dump everything except Chevy, Caddy, Jeep, Opel and Holden.

    Caddy's can be rebaged as Buicks for China and a couple of Opel/holden sports sedans sold as Pontiacs in the US.
  • zermatt
    Chapter 11 is the best alternative for Chrysler and GM.

    GM's leadership (if you want to call it that) has made some unrealistic assumptions in their bailout proposal that shows they have not caught onto the structural problems that they have with over capacity and shrinking market share.

    Chrysler is pretty much as clueless as GM. Assumptions that are far to optimistic and, like GM, leave the door open for the need to make requests for more money from the taxpayers.

    GM estimates that it will tale $100 billion to do a chapter 11 reorganization (a amount I would guess to be inflated to have a fear inducing effect), but they are at $45 billion thus far between money received and money they are begging for now. There certainly is no indication that they will not seek bankruptcy after they get another chunk of tax payer money or ask for additional funds. Why not just do the bankruptcy now and move forward?

    There is no way of know what Chrysler's market cap is, but GM's is only $1.26 billion. Throwing $45 billion at a company worth less than 1/20th of that amount does not make good fiscal sense.
  • Pat
    they say Chapter 11 will cost more than what these companies are asking for
  • zermatt
    That is what GM is saying - $100 billion vs $45 billion to borrow more.

    Again, there is no guarantee that GM won't ask for more taxpayer money or that they won't make this a periodic begging routine - say every 3 to 6 months. They could also just file for bankruptcy after they have burned through any new cash injection.

    It is better to get it over with now.
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