What Would a Chrysler, GM Merger Mean to You?

Gmchrysler

For the past week, rumors of a GM/Chrysler merger have turned from mere talk to an actual possibility. Last night, Reuters confirmed that talks between the two Detroit firms were still on. Earlier this morning, CNBC sources were told that GM and Chrysler would conclude talks by the end of October, either enacting a deal or abandoning the idea entirely.

While it’s being called a merger, most scenarios point to GM buying out Chrysler, just as Chrysler bought out American Motors in the 1980s. This scenario would probably mean the loss of models, and maybe even entire brands, including Chrysler and Dodge. And when we say GM which isn't in the best financial situation, with about nine months of oprating cash on hand is “buying out” Chrysler, there would actually need to be a complex swap of stock, cash and assets with Chrysler’s owner, Cerebus.

Here’s what could happen based on all the reported speculation:

GM: All its brands solider on, with the exception of Hummer, which is under strategic review to be sold or shuttered.

Chrysler: Would become defunct over time. Chrysler and Doge could be folded into GM’s lineup or, most likely, shuttered completely. Jeep, which has always been one of Chrysler’s most valued brands, would continue to exist. Chrysler’s minivans are the firm’s greatest value; a Chevy bowtie — or Saturn, Buick or Pontiac badge — could simply be slapped onto a new Town & Country in very short order.

As a consumer, this sort of tie-up should almost always be viewed as a net negative. Mergers are good for companies and stockholders because they eliminate competitors. The auto industry has too much capacity and too many companies looking for buyers, but that’s a good thing for you. It keeps prices low and gives you the greatest choice.

What GM is trying to do in one swoop is eliminate a direct competitor so that it can drastically reduce supply and survive until better times —  all at the expense of Chrysler, of course. Chrysler sells 26 models; under the above scenario, 18-20 of those models could be eliminated. With fewer players, all car companies could theoretically raise prices or offer fewer, smaller discounts.

However, if the alternative to higher prices and fewer choices is a bankrupt Detroit Three, the merger is probably the best bet for the U.S. economy. However, that would be little consolation for the thousands of Chrysler employees who would be laid off in such a deal. The latest reports say that the entire process could be completed by Halloween. A scary day, indeed.

GM, Chrysler Merger Talks Accelerating (CNBC)

By Colin Bird | October 17, 2008 | Comments (53)

Comments 

Tony

I don't see any issue. Most Crysler models are worthless. Some other attractive but not reliable. All thechnologically way behind.

Finaly GMC will mean something - General Motors Chrysler!

Workers will have to find job at Toyota factory.

And Minivans can continue to sell under VW badge. Will be interesting to see VW's reaction on this.

And imagine GM claming first Swivel and GO!!!

ziggy

A lot of chrysler and dodge models will just disappear. I guess that could be a good thing. There's also the rumor that Renault might pick up Jeep. That could be interesting. I would like to see the return of Renault in the U.S. though.

GM wouldn't have to invest anymore money into a rwd platform, since it will be essentially buying one.

ziggy

And they still won't have anything to compete with the Prius or Insight!

ziggy

Also read that one of the big reasons that GM wants Chrysler is to take over it's factories in Mexico. Let's see...factories with cheap labor...I knew there had to a reason for this. Also rumor is that pretty much everything from chrysler and Dodge will be discontinued with the exception of the Town and Country. Going to be pretty interesting to see how this all plays out.

insight isn't even out yet- how can anything compete with that. If you are talking about cars that aren't sold yet, then the volt can compete with the insight.

broq

Novanglus

Why would they automatically dump the Chrysler brands, when some of their own (Buick, GMC) might be even weaker?
Obviously, only Jeep SUV's, Chrysler minivans, and GM cars/pickups will survive, (http://jalopnik.com/5062950/gm-vs-chrysler-product-lineup-fantasy-draft) but maybe they'd be better off re-branding the last 3 Buicks as Chryslers and putting Ram horns on the GMC's. Dodge trucks still have good brand loyalty in the heartland where GMC has always been a Chevy also-ran, and large Dodge muscle cars (Charger/Challenger) have owned that niche as the GTO's and Crown Vic's disappeared.

ColinB

Novanglus: I can see Dodge maybe taking the place of GMC as a dedicated truck maker. However, Chrysler’s brand equity is completely shot. Buick may not sell that well in North America but it's killing overseas in China.

When you add it all together Buick sells over a half a million vehicles each year. While Chrysler sold 400k last year -- with sales down by 33% this year, most likely ending the year in the high 200k in sales. I'd say Buick is a keeper.

Watchdog

Let's all collectively thank Juergen Schrempp, Dieter Zetsche, et al. for systematically taking a once proud American institution to the scrap heap in only 10 short years. Honorary mention goes to the brainiacs at Cerberus.

X

GM wants access to Chrysler's $11B in cash - that's it. GM does not want more: factories (even if they are in Mexico), workers, or car lines. They are busy trying to shed that themselves. The GM board should be publicly executed as it's inexcusable to watch Wagoner run the company into the ground for 8 straight years.

Thank God that Honda exists. It's nice to be able to buy a product where it's well designed, properly supported, and retains value. You can tell Honda is in business to sell quality cars, not to drive up their stock value. I look forward to seeing GM implode.

Watchdog

X,
You can look forward to economic depression as well...oh but I'm sure Honda has a plan to employ all the tens of thousands who would be out of work and living off entitlement programs funded by you.

alex

this is all about two failing companies. Gm has plenty to work on themselves. Instead of taking on more they need to kill buick, gmc, saturn, hummer, and saab.

Bowrider

The article doesn't mention the fact that GM's talks include swapping the remainder of GMAC (51%) for Chrysler, from Ceberus. So, GM will own Chrysler and no longer own any part of GMAC.

John

Watchdog,
Honda makes great cars so people will still buy them regardless of the economy. It must suck to be stuck with a GM car so I can understand why you are angry. Work a second job, save your money, and some day you buy a Honda. Good luck.

Michael

Great. I just bought a new 08 Ram truck. What happens to my Lifetime Powertrain Warranty? That was one of the big reasons to get the thing! If they shutter Dodge dealers, where do I go for service?
I do wish I could buy a Challenger, though, before they go away. With such a short run it might be a collectible.

Bowrider

Sorry, I have to chime in, off-topic a bit. You represent the pitomy of the lack of thoroughness that all the GM bashers employ when they comment on this site. Watchdog's comment had nothing to do with affording a car. His point makes sense, but you probably don't understand his point because he speaks "above your pay grade." If GM implodes, it would have a dramatic negative effect on the economy. So, regardless of whether or not you prefer Honda to GM, you will be negatively impacted by a GM implosion.

Anyone with a job can afford a Honda. Not sure where you were going with that. People will still buy Hondas, regardless of the economy, just fewer people.

Watchdog

John,
Thanks for the advice but I'm quite happy with my job and am compensated sufficiently that I could go out and buy any Honda I wanted right now. Perhaps you could open your mind beyond the petty nature of your response and recognize the economic impact on everyone, yes everyone including you, if a corporation as large as GM or even Chrysler were to go belly up. I for one do not wish to have a repeat of the Great Depression and the loss of tens of thousands of jobs would be one more step leading us in that direction.

Keith O

A merger of Chrysler and GM is a monumentally bad idea.

GM needs to rid itself of at least four brands (GMC, Saturn, Saab, and HUMMER). It needs to cut down on the number of dealerships. It needs to focus on its four core brands and ways to make them better and more appealing to the American market. And do so quickly, intelligently, and inexpensively. What GM does NOT need is to take on Chrysler. There is nothing there to imply that such a merger would be beneficial to either company. If anything, it may even be detrimental. Anyone remember what happened when Studebaker took on Packard in the 50s? Where are those companies now? Hmm?

I want to see both companies survive. That is why I think Chrysler would be better served if Cerberus sold it to Renault/Nissan. I think Nissan can do what Daimler and Cerberus could never figure out how to do: turn Chrysler around.

As for GM, Get rid of the brands I mentioned earlier, jettison Wagner in favor of Lutz, and watch them get leaner, meaner, more innovative, and more attractive to the American consumer.

DodgeFan

I see GM really needing to get rid of SAAB. Unfortunately its become dead weight in small market. I surprised about merger rumor yet again. Most Dodge Truck loyalist refuse to buy if GM owns. The other problem with a Merger is Chyrsler has locked in deals with Nissan to build cars in the short term. I don't think Nissan has any plans to let them get out of them. I also think GM will shut American Factories and keep Chyrsler's Mexican factories, sorry thats a no-brainer to me. Mexico = cheaper, no union, aleady existing cheap supply base. Plus: Chyrsler is finishing a plant to produce the co-developed with GM six speed tranny, increased tranny supply for GM. Personally I more favorable to the argument for GM to let Chrysler die on its own. I don't think Cerebus is going to give away that 11 billion in cash reserves, Dream on!!! They might make a small concession but give away cash at this period of time with a credit crunch.

Amuro Ray

Lots of people will lose their work - especially those who have little education and have been living by & large the lives of union members.

Lots of suppliers will go bankrupt (think also of paint, metals, fabric, electronics, chemicals, etc). Lots of workers from these suppliers, who are also with little education, will lose their jobs.

Crime rate is going to go up in many places (around those factories). More people sucking the blood from Unemployment Benefits.

Hugh problem with the lifetime warranty. My legal understanding is that the contract is only between Chrylser & its vehicle owners. When either party is dissolved, it doesn't have to be upheld (which explain whys Hyundai warranty aren't transferrable). GM does NOT have to honor it. Lots of unhappy people and many legal actions (great time to be a lawyer!).

What 'bou OEM cooperation like Nissan (Titans/RAM, Versa/Hornets), Mitsubishi (Charger/Galant), or VW (minivan)? GM doesn't have to honor those too!

Ken L.

What do any of you expect from a private equity firm, especially one named “Cerberus”?

Ken L.

I meant "did any of you".

Dave

It could be a good idea...

Picture GM taking the Caliber and giving it a better interior and plugging an ecotec to the CVT

And taking the 300 to replace the Lucerne, making the 3.5L Chrysler V6 the base engine, or an upgrade to GM's 3.6L V6

Make the Charger a Pontiac. Oh wait, but then the G8??

The minivan deal would be great...

What GM should have never done is made sooooo many versions of its Traverse, Outlook, Acadia, Enclave crossover...talk about wasteful competion between Gms chevy, saturn, gmc, and buick...

ajl

ram trucks are scrap. the front suspension is only there to support it out the factory door. in less than two years,most front end components have to be replaced with better aftermarket parts like (moog)! very sad, considering the price of the vehicle!

Neilson

Whether the economy does good or bad I agree with the other poster that the likes of Toyota and Honda will still sell cars and plenty of them. It's well documented that consumers who buy Jap/German cars are more educated, have higher incomes, and are more cultured. None of the above can be said about General Motors customers. The facts are the facts.

TK

I think it's sad when an American wants to buy a car from an American based company that supports mostly American jobs is considered to be inferior to a person who sends their money overseas. If GM, Ford, or Chrysler were to go under there would be a lot of people who drive Toyotas and Hondas who wouldn't have a job anymore. GM, Ford, and Chrysler have made considerable gains in quality. Perception is NOT always reality.

Clarke

"If GM, Ford, or Chrysler were to go under there would be a lot of people who drive Toyotas and Hondas who wouldn't have a job anymore."

You just proved that GM owners are uneducated. Toyota stock: $67.10, Honda $21.87, GM $6.43

How sweet it is!

Keith

Aside from eliminating the competition, Chrysler may have some goodies in the R&D and patent departments for GM. For example, Chrysler has decades of experience with turbos. They got the Hemi. And the Chrysler models that are not axed could benefit from some properly made wheel bearings!

rangerxlt

I haven't been on here in a while.

I'm not really sure whether the merger and/or acquisition is a good idea but if it happens I think GM should do this.

Keep Buick, Chevy, Saturn, Pontiac, and Cadillac

Get rid of/sell SAAB.

Make GMC produce commercial/heavy trucks only.

Get rid of/sell HMUMMER or overhaul it if sufficient cash is available. If GM keeps Jeep then it should probably get rid of HUMMER.

What GM should do with Chrysler.

Get rid of/sell Chrysler.

Keep the Sebring Convertible & 300, (make them Buicks) axe everything else, put Imperial concept into production (if thats even feasible).

Keep Dodge

Keep the Caliber, Challenger, Charger, Dakota, Grand Caravan, Sprinter, & Viper.
Axe everything else & bring the Neon back.

Keep Jeep

Keep all models except Grand Cherokee & Commander.

Mart

Ok, did i SERIOUSLY just read a suggestion to bring the Neon back???? I had no idea this had turned into a comedy forum...

Really, apart from Jeep, I cannot see anything that GM could really take that is better than what it has or will have within a year or so. EVen the ok-selling Caliber is going to look terrible next to the Cruze when it finally arrives. If it happens, take Jeep, axe Hummer, Chrysler, Dodge OR Pontiac and you are good to go.

As a long term Chrysler middle management employee working at the Chrysler Headquarters in Auburn Hills, I am concerned about what will happen to the Chrysler employees if there is a merger with GM. When we had the so called "marriage of equals" with Daimler at least we didn't have overlap of jobs so few people lost their jobs. There were significant headcount reductions later but they were in response to the declining market and increased global competition. A merger with GM would most likely result in most salaried and union employees losing their jobs. There may be a transisiton period but once that is over people will be unemployed. This couldn't happen at a worse time with the high unemployment rate we alrady have in Michigan. I wish our sernior management would at least let us know what would happen if there was a merger with GM. I'd prefer a merger with Fiat or Renault-Nissan over GM. While I'm very worried about all of this and how it would effect my family I want what is best for preserving the pensions for current and future retirees. If merging with GM is the only solution then I pray that it is accomplished in a way that is as humane as possible and the livilihoods of the retirees, employees, dealers and suppliers are taken into account. Also, it seems to me that the Government should step in and do something to free up cash for car loans so all three of the Big 3 automakers can start selling vehicles again. Then maybe we wouldn't need to be talking about a merger. I'd also like to say that I've been blessed to have worked for Chrysler for all these years. The Company has been very good to me and in turn I have been a dedicated and loyal employee. The overall Chrysler culture, on average, has been an employer/employee freindly one, with some exceptions I'm sure. I don't know what the GM culture is like. While I worry for myself and my fellow employees I also worry about employees of other companies who are also experiencing these kind of worries and most of all for the unemployed or underemployed. These are very tough times for many people. We should all be sensitive when discussing this issue on forums such as this. Realize that the reader may be someone like me who is holding on to hope for the best Thank you.

J

The merger only mean one thing to me: More classmates are going to dislike what car I drive, and blaming me for this is happening while it is those 2 automakers' fault for not listening to the customers.

GM needs to trim its own fat! There is way too much platform sharing with very little difference between the brands.

George

Lynn,
Don't worry, Barack Obama will fix everything. What he lacks in real world experience he makes up in pretty words. You'll just have to get by the fact that he drives a Ford. I'm George and I approve of this message.

Juan Carlos

those millions of new jobs that the messiah wil bring will go to you. you will be installing solar panels or windmills. and since the troops will be coming from iraq, all that money that is going to iraq will be go for your food stamps and welfare checks as you wait for that solar panel job. and if you need healthcare, companies will have no choice but to take you. don't worry, everything will be alright with change.

Ted K

Senator Obama will create at least 5 million new jobs. You just need to ignore the fact that he's never created a job in his entire career and that even the NY Times top economist cannot figure out how these so-called 5 million 'new energy' jobs will come about. Other than that you will be in great hands.
It's amazing how the two best candidates, Hillary and Romney, are not even in the race. What a farce.

Rorbert Dodge freek

Keep Dodge its the best put the Dodge Ram in the GMC's place the Dodge Challenger stays no way its not going anywhere like the Viper now the Dodge Charger you are all forgeting its the new Police cars and GM wants the vans and the electric cars I love Dodge and i like chevy but Dodge is not going away.

Roddy

I drive a GM and I have a college degree. The truly 'uneducated' people on this blog are those who wish our once proud American companies to go under. Do you not realize the domino effect that would have on EVERY industry in the world? You will be screwed just like everyone else, but you can proudly park your Japanese Honda behind McDonald's, by the leaking dumpster, where you will be waiting for your 10 am appointment to apply for a job flipping burgers. Oh wait, those jobs are already taken by the uneducated immigrants who came to America for their dream of driving a 10-year old Camry.

TrueAmerican

Roddy,
Hopefully GM will go out of business sooner rather than later as the likes of Honda, Toyota and Nissan will have no problem picking up the slack. Finally Americans can be treated to quality engineering. It's obvious you have been educated by the public school system as you fail to comprehend that all Jap car makers have been building cars in the USA, some since the 80's. Now super-size my order before I dope-slap you again.

Health care!! Remove the health care obligations of the big three and they will be able to compete with their foreign counterparts who have the advantage of their governments picking up that tab.

True American,
I don't think Honda or Nissan would be physically able to pick up the production slack of a GM. Toyota would have an easier time of doing it but still wouldn't be able to come close. All three would be a mighty tough try. Plus, less competition usually means inferior products not better ones.

Happymantis

Roddy,
First of all, I refuse to take sides in the domestics vs. imports battle, but your comment about uneducated immigrants driving 10 year old Camrys bothered me, first of all, at every fast food joint parking lot that I've observed, the workers drive 15 year old imports, and then they also drive brand new domestics that were brought through easy credit and extremely generous cash rebates being offered by the likes of GM, Chrysler, and other domestics... I mean, heck, if I was a low paid employee with a McJob, I'd want to get the newest car out there, and a brand new domestic would cost me much less than a brand new import, since historically, domestics are more generous with the rebates and financing (yes, I know Toyota has been offering 0% APR financing due to the current market, but I'm talking about the past 7 years or so that I've been in this country).

cody

i'm not sure this one is even worth diving into...the crap's pretty deep.

it's funny how these always turn into arguments between the import and domestic fan crowd. dave t., do you think you could mediate just a bit?

posting on the actual topic here...

if they did merge, the main benefit i would like to see is diversity of the gm line up.

gmc could pick up the dodge truck and suv line up. upgrade/update the vehicles, sprinkle in some (not too much) gm goodies, and go their merry way. this would give them a reason for existing. a distinct line up separate from chevy.

pontiac and buick could split the dodge and chrysler cars. they would have to invest some money to change the looks and update/upgrade some of the hardware and powertrains.

keep jeep and kill hummer.

this change would give each brand in the gm family differentiation, and thus, a real reason for existing.

cody

oh, btw, i'm not for the merger. i think chrysler offers some good vehicles that just need a little cash invested to polish them, as gm has done with their lineup over the past couple years.

i'll say as i've said before here. no cars sold in america today are truly bad cars. all calls (domestic or import) are solid, well engineered, reliable cars that, if you follow the maintenace sched, will last you 200K or 300K miles. anyone who says otherwise is truly biased and uninformed.

Stewart

All these comments sounds like it coming from perceptions and not the facts. Have you seen the latest 2009 Dodge Ram? It outs the Checy Silverado and GMC Sierra to shame. Chrsyler has the most potential out of the other big three. It would be a bloody shame to waste a great American car/truck company. I think Chrysler is fianlly doing good things now that they have moved away from Mercedies.

Michael

I think it could be a good thing to minimize lines and just keep the best. Like scrapping gm trucks and keeping the proven dodge. Lots of cars and suvs could be combined. The plants that stay open could at least be open all the time. Lots of jobs could be lost but the places left open could be healthy.

rangerxlt

Mart,
I said bring back the Neon because before it was discontinued it was still selling 100k+ units per year and if wasn't discontinued sales might have gone up when gas prices rose.

donte

i think to let this all happen is stupid there both struggling one worst then the other this will make the economy dwindle because gm just wants the money.there is no other reason since the general is supposed to be the better brand i hope it never happens and maybe nissan or honda may consider a buyer. iam a fan of chrysler and think that they just need new management to fix everything.

The Omega Man

If the Dodge Truck goes away I'll be switching to a Toyota or Nissan. No way in Hell I'll purchase ANYTHING from GM. Might consider a Ford. In my area Dodge is BIG and most of those owners would never buy a GM product nor a Ford. This isn't a smart move by GM at all. A Nissan/Renault/Chrysler merger makes much more sense. I know GM is big in some parts of the country but as another poster has stated they are big in the Heartland and these Chrysler owners aren't likely to switch to GM, that's just way to much to ask.

JJ

I hope the merger doesn't happen. There will be thousands of displaced Chrysler workers if this does happen. My husband being one of them. I think this is a perfect example of large companies getting help from our government, while main street suffers.

JJ,
Unfortunately for your husband and others at Chrysler, merger or not, they'll probably be out of jobs. According to most sources Chrysler will not continue either way. The question is will GM continue.

Robert

I agree about GM selling Hummer and they need to sell some others. But what I would love to see is a Cummins diesel in a Silverado. If and when the market comes back Chevy would corner the market with that pairing.

Robert

I agree about GM selling Hummer and they need to sell some others. But what I would love to see is a Cummins diesel in a Silverado. If and when the market comes back Chevy would corner the market with that pairing.

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