GM/Chrysler Merger Could Happen by Halloween

Talk about Alice In Wonderland!

GM/Chrysler Merger Could Happen by Halloween

Reports of the demise of merger talks between GM and Chrysler appear to be greatly exaggerated. In fact, the New York Times reports that merger negotiations have intensified. "With G.M. burning through cash and auto sales sinking to historic lows, [GM CEO Rick] Wagoner is pushing hard for a merger with Chrysler," the Times writes, adding that the push "illustrates G.M.'s precarious state." General Motors, once the world's largest automaker, has been struggling to raise cash in a down market, and has been dogged by bankruptcy rumors for months.

But GM isn't the only one anxious for a deal. Thestreet.com reports "Major banks, such as JPMorgan Chase that have long been lenders to both companies also are eager to do a deal to help reduce exposure to the auto industry," and that "Cerberus Capital, which owns Chrysler, is looking to have a stake in a combined GM-Chrysler."

The Wall Street Journal thinks the deal could be done by Halloween. "GM is set to report dismal third-quarter earnings in coming weeks," they report, "And is scrambling to find new sources of funding, according to people familiar with the matter. That's spurring the auto maker to complete the deal as soon as the end of October."

While several industry analysts have panned the idea of a merger, not everyone sees only downsides. Detroit News Columnist Ray Windecker writes that while the merger may seem to be "two drunks leaning on each other . . . what is missed is what happens when the less inebriated drunk picks the pocket of his partner." He compares the merger to the Studebaker/Packard merger of the 1950s. "Studebaker had a larger number of dealers," he writes, "an interesting but overpriced collection of smaller and sporty cars and a decent line of light and medium trucks. Packard only had moderately updated luxury cars, but it did have cash." In this case, "GM has the dealer and product advantages, while Chrysler (through its majority owner Cerberus) has spare cash."

That might be Chrysler and GMs exact line of thinking. However, there are still a number of hurdles to overcome. The two companies would have to agree to put a number of models and brands on the chopping block, a move that would surely irritate their dealer networks. Then there's the dealer network itself, which would likely have to undergo some cuts. Several unions are against the proposed merger as well, with one union leader telling the Detroit Free Press that the merger would spell "absolute catastrophe." In the event of a merger, both companies would close plants and shed workers as they try to streamline the operation. While acknowledging that the unions haven't talked to either GM or Chrysler about the merger, The Free Press reports, "UAW President Ron Gettelfinger said he would oppose any deal that would reduce the workforce."

While the Big Two may be an accurate metaphor for Detroit's fortune's right now, we'll keep you posted on all merger talks from the Big Three. Check out how your favorite, possibly soon to be extinct, Chrysler and GM models are doing in U.S. News' car rankings.