Monday, October 27, 2008

GM/Chrysler Merger


So, here we are: the Big 3 turned into the Detroit 3 last year and it's very likely that within the next few days we have to get used to the Detroit 2. But, should be there a Detroit 2 or just Ford?

It's almost impossible for me to understand the attraction for GM to merge with Chrysler: Both have a comparable product line, too many truck factories, Chrysler's 3,500 strong dealer network and Chrysler doesn't have any exciting product launches in the pipeline. The proposed merger is just a scheme by GM to survive the foreseeable future because Chrysler has $11 billion in cash, while GM has around $20 billion and burning monthly through $1 billion. The deal would allow GM to stick around longer and hope for a changing environment, another 'Too big to fail bailout' and more leverage when dealing with the administration.

While the banking system is at the heart of our capitalistic world, car makers are not. Yes, they provide millions of jobs but the world as we know it won't end if GM fails. Ultimately, it might be best if GM would just file for bankruptcy and start over again as a much smaller and more focused company. A merger will prolong the pain. I wish the administration would send out DNR orders to GM to let them know that they are on their own. Either continue your shell game with a merger or start radical cuts immediately. To build a sustainable business for decades to come. But, I guess, I'm just dreaming.

1 comment:

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