GM-Chrysler deal analyzed
Analysts and industry executives questioned why GM, whose own turnaround efforts are still under way, would use some of its $26.4 billion in cash raised by selling profitable assets such as GMAC to buy another unprofitable North American automaker.
The companies declined to comment on the reports.
"Anything's possible, but this one seems unlikely," said John Casesa, a longtime auto analyst and managing partner of New York-based Casesa Strategic Advisors LLC.
"It would increase exponentially the challenges GM faces in turning around the company. These two companies have an immense amount of overlap in people, plants, dealers and products, and there'll be very considerable cost in working through all that."
Shares of DaimlerChrysler gained $3.08, or 4.4%, Friday to close at $73.33 on the New York Stock Exchange, and have gained 13.8% since DaimlerChrysler Chairman Dieter Zetsche first said all options were on the table concerning Chrysler's future. German shareholders own most DCX shares, and several advocates have argued for years that reversing the Daimler-Chrysler merger would restore Daimler's steady profits.
The finances of such a deal are certainly within reach for GM. Banc of America analyst Ron Tadross said GM could spend $5 billion for Chrysler, accept short-term losses of $750 million a year, and still make the deal work assuming synergies of $2 billion a year.
But Tadross noted that a combined GM-Chrysler would be a hodgepodge of 15 brands and 10,000 dealers, compared to Toyota Motor Corp.'s three brands and
1,500 dealers. While GM would get access to Chrysler's minivans and rear-wheel-drive sedans, the companies' lineups would overlap in nearly every other segment."In addition to integration risk, we think the new company's 30% U.S. retail share could become more vulnerable over time," Tadross said, adding that "rebadging of vehicles is increasingly transparent to the consumer."
David Cole, chairman of the Center for Automotive Research in Ann Arbor, said UAW President Ron Gettelfinger, a member of DaimlerChrysler's supervisory board, may be pushing discussions with GM.
"I don't think Chrysler is going to stay in DaimlerChrysler," he said. "If I were Ron, I would like to have, probably, an American company be the buyer versus a Chinese company or a French company or a private-equity group."
Morgan Stanley analyst Jonathan Steinmetz questioned whether the rumors were "at least in part posturing" by DaimlerChrysler for the UAW.
"It is unclear why the UAW would be willing to accept a GM-Chrysler consolidation, which would reduce their bargaining position and possibly lead to significant job cuts," Steinmetz said in a note.
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