No More Dodge Viper or "Hemi" anything soon?

[SpaceGhost]

Worries grow as GM-Chrysler talks gain momentum

By TOM KRISHER

 

 

DETROIT (AP) -- In the doomsday scenario raising anxiety around the Motor City, General Motors Corp. makes a deal for Chrysler LLC, keeps Jeep and the minivans, and vaporizes the rest of the company.

 

Tens of thousands of Chrysler's 66,409 employees lose their jobs as cash-desperate GM swiftly cuts redundant operations and sheds unprofitable models. Factories and dealerships are closed, and the lights go out at Chrysler's gleaming corporate headquarters campus in the northern suburb of Auburn Hills.

 

It's not something Andre Thibodeaux wants to think about. The general manager of Lelli's, an upscale steakhouse and Italian restaurant near Chrysler's 15-story tower, gets about half his lunch business from the automaker and related businesses.

 

The eatery, with roots in downtown Detroit and family owned for three generations, already has lost business as Chrysler and parts suppliers have downsized and people eat out less due to economic worries. The loss of Chrysler's corporate headquarters is almost unthinkable.

 

"I can't imagine moving the building or changing or selling or anything like that," said Thibodeaux. "Auburn Hills in general is built all around that building."

 

Although it may be unimaginable, industry analysts say GM would have no choice but to slash costs if it acquires struggling Chrysler from its current owner, New York private equity firm Cerberus Capital Management LP.

 

Both sides have been talking for months, but the pace recently has increased. Cerberus wants out of the auto business, and as the credit markets have dried up, GM, worried about running too low on cash before the U.S. auto market rebounds, wants Chrysler's currency stockpile.

 

A person familiar with the negotiations said Friday that the talks have advanced to the point where top executives of both companies have looked at a deal and asked for refinements. The person spoke on condition of anonymity because the talks are secret.

 

In August, Chrysler said it had accumulated $11.7 billion in cash and marketable securities as of June 30. That figure remains around $11 billion, the person said, despite Chrysler's U.S. sales being down 25 percent through September, the largest decline of any major automaker.

 

Detroit-based GM is burning up more than $1 billion per month, with several analysts predicting it will reach its minimum operating cash level of $14 billion sometime next year. GM's sales are down 18 percent, and the company has lost $57.5 billion in the past 18 months, although much of that comes from noncash tax accounting changes.

 

Chrysler's money pile would help solve GM's cash problem if credit remains unavailable.

 

Both automakers have had to deny bankruptcy rumors in recent weeks, saying people who won't buy cars from a company that looks like it could go out of business.

 

According to the person familiar with the negotiations, the deal being discussed thus far calls for Cerberus to hand over Chrysler in exchange for GM's 49 percent stake in GMAC Financial Services. GM sold a 51 percent stake in its finance arm to Cerberus in 2006.

 

Cerberus also would get an equity stake in GM, hoping to get a good return should GM recover when U.S. auto sales bounce back from a serious slump.

 

Other automakers, including the allied companies of Renault SA and Nissan Motor Co., also are in discussions about Chrysler, the person said. Simultaneously, Cerberus, which bought 80.1 percent of Chrysler from Daimler AG in a $7.4 billion deal last year, is negotiating to acquire Daimler's 19.9 percent stake.

 

GM and Cerberus are still a long way from a deal, according to the person, and GM's board reportedly is cool to the idea.

 

All that GM, Chrysler and Cerberus have said about the negotiations is that automakers meet all the time. Chrysler Chief Executive Bob Nardelli said Thursday the auto sales drop has created an environment that favors consolidation.

 

It's the uncertainty of consolidation that worries many in Michigan, which has lost more than 400,000 jobs since 2000. Its unemployment rate in September was 8.7 percent, the highest in the nation, as GM, Chrysler and Ford Motor Co. continued to make cuts.

 

"Mergers usually represent job loss," Gov. Jennifer Granholm said Friday on the Public Broadcasting Service's Nightly Business Report. "We are fearful that a merger would mean more job loss, and that is the last thing we need."

 

Among the fearful are Chrysler workers and its roughly 3,600 dealers, who already are under pressure from the company to merge with other dealers and scale back their ranks.

 

"If you end up going from the Detroit Three to the Detroit Two, you don't need as many dealers representing those nameplates," said Dale Early, owner of a Chrysler-Jeep dealer in the Houston suburb of Kingwood, Texas. "With the market the way it is today, you don't necessarily have a need for three major manufacturers," he said.

 

The upside of an acquisition, industry analysts say, is that it would almost certainly shrink the U.S. auto industry to where it needs to be so the survivors can thrive. Many analysts are predicting that the U.S. auto market will shrink to sales of about 13 million vehicles this year. That's a drop of about 3 million from 2007, and the decline is more than Toyota Motor Corp.'s U.S. sales last year.

 

GM would almost immediately make cuts to eliminate duplication, save costs and hoard cash, and that means something like the doomsday scenario would occur, said Jeremy Anwyl, CEO of the Edmunds.com automotive Web site.

 

"At the end of the day you're looking at two companies having a much-reduced market share than the two independent companies," he said. "The only way to make that work is some sort of scenario where there's massive shutdowns and job losses."

 

But GM may see value in and keep other parts of Chrysler, which has several of the industry's most productive parts plants.

 

While the deal would likely cost jobs, David Cole, chairman of the Center for Automotive Research in Ann Arbor, said local economies and labor would still be better off than if one of the automakers were to fail.

 

"This would be good for the state because whatever happens in combining is going to be a lot less severe than an outright disaster," he said.

 

Chrysler veterans, though, have seen the movie before with the 1998 takeover by Daimler and the subsequent sale to Cerberus.

 

"A lot of the things that would come out of something like this, we've already had the anxiety related to it," Early said. "At some point I guess you refuse to feel like the sky is falling because you've already been through some of the dark days already."

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/18/AR2008101800920.html

 

[Scotty2Hotty]

Kinda crazy to think an American car company going under. Gotta feel for all the people involved in Chrysler.

[dragknee66]

This just isnt good

[JaSSon]

This is not a good thing. I hope merger fails.

[Trjackson]

So does this mean GM would own mercedes as well?

 

Jackson

[TTQ B4U]

LS3 Powered MiniVan's ? Hey, for those of us with kids

[Drewhop]

So does this mean GM would own mercedes as well?

 

Jackson

 

 

Chrysler doesnt own Mercedes. Mercedes essentially did a merger taking 57% controlling share in the combined company and basically did a hostile takeover of Chrysler key officials replacing them.

 

And then.... Daimler chrysler split Mercedes basically took themselves out of the pictures about a year or so ago. Chrysler is on there own.

 

So nope GM would not own mercedes lol.

[Mallard]

Chrysler doesnt own Mercedes. Mercedes essentially did a merger taking 57% controlling share in the combined company and basically did a hostile takeover of Chrysler key officials replacing them.

 

And then.... Daimler chrysler split Mercedes basically took themselves out of the pictures about a year or so ago. Chrysler is on there own.

 

So nope GM would not own mercedes lol.

Well, actually Diamler still has a minority holding in Chrysler of 19.9%, but apparently Cerberus is trying to buy them out.

 

Everyone needs to hope and pray that this merger does not go through. It would mean thousands of jobs lost and would drag GM down even more during a down market. This merger could be very bad news for the Detroit area.

[SpaceGhost]

My thinking is this would put us right in the great depression, these plants closing will have all kinds of effects on Auto suppliers and materials suppliers for the cars. This company is a huge part of our economy. No way this can happen.

[Doug1647545489]

mmm Lelli's is really good.

[getnbze]

i dont know why GM would even want this. they are not doing well themselves and they want to try to take on another company that is not doing well acually doing worse. turely the only thing chrysler and dodge have worth anything is trucks and like one of the best rated minivans

[2 Sweet]

GM is dumping Hummer, they want Jeep, and they want Chrysler's cash. Thats how I see it.....

[Drewhop]

Well, actually Diamler still has a minority holding in Chrysler of 19.9%, but apparently Cerberus is trying to buy them out.

 

Everyone needs to hope and pray that this merger does not go through. It would mean thousands of jobs lost and would drag GM down even more during a down market. This merger could be very bad news for the Detroit area.

 

 

I thought cerberus had already bought them out thanks for the info.

[DTM Brian]

Kinda crazy to think an American car company going under. Gotta feel for all the people involved in Chrysler.

 

 

Think of how many american car companies went out of business years ago. It is only going to get worse.

 

Thank you Honda, Toyota, etc!!

[sol740]

 

Thank you Honda, Toyota, etc!!

 

 

Can't blame anyone but the american car companies.

[Archie]

More like thank you NAFTA... parts/cars made overseas ftl. I like how even after cutting costs by outsourcing, we still pay the same for junk cars.

[BIGGU]

Can't blame anyone but the American car companies.

+1 just because the international cars are along and did hurt the American companies you still cant blame them. its just the fact that when the imports came in they had so much better build, reliability and prices then the Americans had. although it does seem like the Americans are being made now are getting close to the imports its just more of a preference thing with people now.

[Guest 614Streets]

i dont know why GM would even want this. they are not doing well themselves and they want to try to take on another company that is not doing well acually doing worse. turely the only thing chrysler and dodge have worth anything is trucks and like one of the best rated minivans

 

You should read the article. GM will get chryslers cash.

[2 Sweet]

When Honda/Toyota/etc have to start dealing with retired employee benefits, retirement funds, pensions, all that stuff, then they will be hurting too

[Brandon]

You can blame american politicans, for allowing predatory capitalism to take place. It was obvious what the japense manufactors where doing.

 

And we let them get an unfair advantage over our car companies.

 

Shame

[Patrick]

More like thank you NAFTA... parts/cars made overseas ftl.

 

 

North American Free Trade Agreement?

 

Overseas?

 

I see where you are getting at, but yeah.

 

Detroit's already dead, might as well light a last fire.