GM & Chrysler explore merger

[Michael]

G.M. and Chrysler Explore Merger
By BILL VLASIC and ANDREW ROSS SORKIN
Published: October 10, 2008

DETROIT — General Motors is in preliminary talks about a possible merger with Chrysler, a deal that could drastically remake the landscape of the auto industry by reducing the Big Three of Detroit automakers to the Big Two.

The talks between G.M. and Cerberus Capital Management, the private equity firm that owns Chrysler, began more than a month ago, and the negotiations are not certain to produce a deal. Two people close to the process said the chances of a merger were “50-50” as of Friday and would most likely still take weeks to work out.

Source: NYTimes (http://www.nytimes.com/2008/10/11/business/11auto.html?_r=3&hp&oref=slogin&oref=slogin&oref=slogin)

GM is presently at $5 per share? :eek:

I can't say I've not seen this coming. I've been watching the decline in the US 'Big Three' for years. Their combined share of the North American market has been dropping steadily EVERY YEAR since the late 1970's. They are likely to slip under the 50% line for North American car market-share within the next year. That is mind-boggling to watch failure on such a grand scale in slow motion. For auto-workers, it must be agonizing.

Both of these companies are so disfunctional that I really don't know if a merger is good news or bad news for either one of them. Someone really ought to let Chrysler die a peaceful death one of these days.

[partofme]

Looks like the auto companies will likely get a big bail out as well. This will delay the inevitable and merely direct capital from industries that are ran better to one that is failing. I hate it when it is said that part of it will be used for research and development which is what they should have been doing anyway. As far as a merger last report I saw suggested that talks are being put on hold for the time being.

[Michael]

Lots of discussion going on this issue. Bailout package looks unlikely for the lameduck Congress.

Democrats are insisting that the $25 billion the automakers want ought to come out of the already approved $700 billion.

Republicans are going to play political-hardball (as they always do) and punt this one off to the Democrats (and block them). That way they can blame anything and everything on the Democrats' action.

I don't see either scenario resolving easily in the next few weeks.

To be honest, I'd go along with the Democratic plan at this time - $25 billion out of the $700 billion 'rescue' package.

Now I'd much prefer to send GM into Chapter 11 and nothing short of that is going to help GM. However, it has become apparent that due to the 'credit crisis' Chapter 11 is not really available to GM and thus they'd be forced into Chapter 7 and that means straight liquidation. Given the recession going on, letting GM hit the wall and go bang probably isn't a good idea right now. If GM hits Chapter 7, that's approximately a million jobs down the drain real soon.

The $700 billion is already becoming a 'slush fund' so why not spread a bit of the gravy at the automakers - they certainly need it.

The $25 billion won't solve the automaker's problem, really only provides them some free credit to buy another year or two. We can let them go Chapter 11 then when the markets are in better shape. But GM or Chrysler MUST hit Chapter 11 for any possible improvement in the US auto industry. Nothing short of Chapter 11 is going to do it.

[Americano]

With the critical challenges Obama is facing, I'd forget about the $25B, give it to them, shut them up and focus on important issues. Take a look in six-months, re-evaluate and make a decision. If they last that long.

The honeymoon was over the day he was elected. He needs to build momentum in a manner that builds public confidence and saving those imaginary jobs is an immediate political necessity. He doesn't need civil unrest beyond our current level and now $50B (remember the $25B domestic car companies received in the recent energy bill) or $100B keeps people working and generating cash flow in a consumer economy.

He's already said he's going to spend a lot of money without regard to spending deficits and that's about all he can do. IMO how and where he spends it will become important US issues and invite discussion.

[partofme]

With the critical challenges Obama is facing, I'd forget about the $25B, give it to them, shut them up and focus on important issues. Take a look in six-months, re-evaluate and make a decision. If they last that long.

The honeymoon was over the day he was elected. He needs to build momentum in a manner that builds public confidence and saving those imaginary jobs is an immediate political necessity. He doesn't need civil unrest beyond our current level and now $50B (remember the $25B domestic car companies received in the recent energy bill) or $100B keeps people working and generating cash flow in a consumer economy.

He's already said he's going to spend a lot of money without regard to spending deficits and that's about all he can do. IMO how and where he spends it will become important US issues and invite discussion.

I don't think anybody is going to do much for the budget for a few years at least.

[Michael]

With the critical challenges Obama is facing, I'd forget about the $25B, give it to them, shut them up and focus on important issues. Take a look in six-months, re-evaluate and make a decision. If they last that long.

The honeymoon was over the day he was elected. He needs to build momentum in a manner that builds public confidence and saving those imaginary jobs is an immediate political necessity.
Yes, I think this is the key issue. Failure to move on this issue could cause a HUGE distraction and make any other Obama policy initiative problematic.

Given US economic scale, $25 billion isn't that much money. France or Germany wouldn't even blink about spending $4-5 billion euros to prop up one of their national icon corporations and that's a comparable scale.

[Malvolio]

GM's Opel Wants German Loan Guarantees

by Brett Neely
Listen Now (javascript:NPR.Player.openPlayer(97124774, 97124743, null, NPR.Player.Action.PLAY_NOW, NPR.Player.Type.STORY, '0')) [1 min 30 sec] add to playlist (javascript:NPR.Player.openPlayer(97124774, 97124743, null, NPR.Player.Action.ADD_TO_PLAYLIST, NPR.Player.Type.STORY, '0'))

Morning Edition (http://www.npr.org/templates/rundowns/rundown.php?prgId=3), November 18, 2008 · Executives from General Motor's European unit, Opel, met Monday with German Chancellor Angela Merkel. They want more than $1 billion in loan guarantees from the German government. Opel is seeking the guarantees because the company expects difficult credit conditions on the open market due to the world financial crisis.


http://www.npr.org/templates/story/story.php?storyId=97124774&ft=1&f=1004

[Michael]

Apparently Canada & Ontario are now floating the idea that they will offer a bailout package to the 'auto-sector' on both sides of the border if Obama wants to move on the issue and the lameduck Congress is as lethargic as usual.

Honda & Nissan are already lined up in support of the Canadian initiative here.

The thinking here is that if Obama wants a $25 billion bailout package but has to wait till late January to move on it, Canada can/will front the money for this package now.

There are no details yet - but Canadian/Ontario officials are meeting in Detroit right now with the US automakers and are due in Washington on Thursday to meet with Obama and Congressional officials.

[Americano]

Apparently Canada & Ontario are now floating the idea that they will offer a bailout package to the 'auto-sector' on both sides of the border if Obama wants to move on the issue and the lameduck Congress is as lethargic as usual.

Honda & Nissan are already lined up in support of the Canadian initiative here.

The thinking here is that if Obama wants a $25 billion bailout package but has to wait till late January to move on it, Canada can/will front the money for this package now.

There are no details yet - but Canadian/Ontario officials are meeting in Detroit right now with the US automakers and are due in Washington on Thursday to meet with Obama and Congressional officials.

How many GM/supplier jobs in Canada?

[Michael]

How many GM/supplier jobs in Canada?
Not sure exactly. About 100,000 jobs for the Big-Three US companies.

It is the autoparts supplier network that Ontario is most concerned about. Easily another 400,000 jobs there. Magna International (Ontario company) is supposedly the largest autoparts company in the world.

[Americano]

Not sure exactly. About 100,000 jobs for the Big-Three US companies.

It is the autoparts supplier network that Ontario is most concerned about. Easily another 400,000 jobs there. Magna International (Ontario company) is supposedly the largest autoparts company in the world.

Are the Japanese manufacturers in Canada similar to those in the US where they have somewhat self-contained production with less dependency on sub-assembly suppliers?

[Malvolio]

..... it's not that you can't make any money in the auto-industry these days.

Porsche's profit soars on VW stake

Friday, November 07, 2008
By MATT MOORE, AP Business Writer




FRANKFURT, Germany —
Luxury car maker Porsche SE said Friday its profits soared by 52 percent in its latest fiscal year _ driven higher by gains in its stake in Volkswagen AG, Europe's biggest automaker.The Stuttgart-based maker of the 911 sports car and the Cayenne sport utility vehicle reported a net profit of nearly 6.4 billion euros ($8.2 billion) for the year that ended July 31. That compared to the 4.2 billion euros it earned in the 2006-2007 year. The company does not release quarterly resultshttp://www.foxnews.com/wires/2008Nov07/0,4670,EUGermanyEarnsPorsche,00.html

[Michael]

Looks like Fiat just bought 35% of Chrysler.

Under terms of a pact that is being hammered out, Fiat is likely to take a 35% stake in Chrysler by the middle of this year. It would have the option of increasing that to as much as 55% ...

Fiat ... wouldn't immediately put cash into Chrysler. Instead it would obtain its stake mainly in exchange for covering the cost of retooling a Chrysler plant to produce one or more Fiat models to be sold in the U.S. ...

Source (http://www.calculatedriskblog.com/2009/01/fiat-and-chrysler.html)

Well, Fiat is getting a cheap deal here. Why Fiat thinks that now is a great time to invest in the US car market is beyond me, but hey, you never know.

[Americano]

Fiat's stock took a big hit for that little adventure.

I don't understand why Fiat would be seeking representation in the obviously declining US car industry. Maybe something small and cheap that gets 50mpg?

[Michael]

Fiat's stock took a big hit for that little adventure.

I don't understand why Fiat would be seeking representation in the obviously declining US car industry. Maybe something small and cheap that gets 50mpg?
That segment of the market is woefully under-represented in the USA.

That is a potentially good market segment - no competition from GM, Ford or Chysler there.

[Americano]

That segment of the market is woefully under-represented in the USA.

That is a potentially good market segment - no competition from GM, Ford or Chysler there.

That's supposedly going to be China's market. Does Fiat have any current offerings in the cheap, efficient category?

[Dominick]

That's supposedly going to be China's market. Does Fiat have any current offerings in the cheap, efficient category?
Plenty. It's as good as their trademark. The new 500 is a really attractive car, though possibly too small for American standards. There's also the Panda, the 600 and the Punto.

[Americano]

Plenty. It's as good as their trademark. The new 500 is a really attractive car, though possibly too small for American standards. There's also the Panda, the 600 and the Punto.

American vehicle standards may become a moot point as US standards of living drop.

[Greendruid]

Agreed - I'm 6'1" and find Japanese economy class cars relatively uncomfortable to sit in. I still own one to get to work though because they're great on the gas consumption end of things.