GM-Chrysler deal analyzed
News that DaimlerChrysler AG was discussing the possibility of selling the
Chrysler unit to General Motors Corp. cheered its mostly German stockholder
base Friday, but drew jeers elsewhere.
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.
"The king of Israel answered, "Tell him: 'One who puts on his armor should
not boast like one who takes it off."