GM-Chrysler Merger Talks: Mr. Wagoner Goes to Washington
By Michelle Krebs October 28, 2008By Michelle Krebs
DETROIT -- General Motors CEO Rick Wagoner reportedly is heading to Washington, D.C.,
to personally lead a lobbying effort to obtain federal aid, paving the way for GM and Chrysler to merge.
GM and private equity firm Cerberus Capital Management, the custodial parent of Chrysler, reportedly are asking the federal government for $10 billion to help them merge.
Backs to the wall, the two companies apparently see no remaining options for survival beyond a government rescue, since such a merger defies business logic. Since Washington is doling out bailouts by the billions these days, the timing is right, and the two are clearly setting up a "too-big-to-fail" position to bolster their case.
Indeed, combined, GM and Chrysler represent roughly a third of U.S. vehicle sales. Between them they have 11 brands, about 10,000 dealers, 97,000 union workers and 50,000 salaried employees before the lastest round of white-collar cuts were announced last week. A large number of suppliers derive their livelihoods from GM and Chrysler as well.
GM-Chrysler would use the $10 billion in federal funds -- and perhaps some of the $11 billion Chrysler claims it has -- to pay severance to the thousands of employees that would be laid off because of the massive overlap of operations, brand and vehicles between the two companies and to pay off dealers who will be driven out of business by the merger.
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This is a hugfe mistake between Chrysler and GM. A merger would just take whats left of GM's cash. Let GM and Chrysler fail or prosper on their own. Chrysler should merge with Nissan if anything. But GM and Chrysler would never work. Too many egos and not enough cars. This is a move by Nardeli to try to get control of GM for himself.
So, we have Rick Wagoner, whom has yet to marshal a successful restructuring plan after several attempts, wanting to merge with Chrysler LLC ("Little Low on Cash"). We saw what happened, wow, only fourteen months ago, when Cerberus paid $7b for their 80% share of Chrysler; they couldn't sell the bonds. The free market said, "No, your products are not in high enough demand. It's too risky. Sorry." Cerberus instead had to sell off valuable assets to live up to their deal.
Daimler, one of, if not the oldest, auto companies on the planet, lost over 30 billion dollars over the nine or so years they had it.
You are not too big to fail, Messrs. Wagoner & Nardelli. As one of America's 155 million taxpayers , my share of the ten billion you seek comes to about $64.51. Plus the interest on the T-bills we will have to sell to China to fund your doomed scheme. The market has moved on. If your products are not in high enough demand to warrant continuing in business, you cease operating. Sorry.
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