AFSCME 3357-HOF'S BLOG

GM - Chrysler Merger

You will be Assimilated




Those not in the know have been scratching their heads trying to figure out any sensible reason for Chrysler and General Motors to merge. It doesn't make sense for GM to take over Chrysler just to get Chrysler's cash, because there's not enough of it. Even if there is $11 billion (and I think it's more like 4 billion), it's not enough to cover Chrysler's unavoidable liabilities, the cost of the merger and the cost of restructuring Chrysler's good bits into GM, at least not in the long term.

The Detroit News has an article today speculating that GM's goal is to dismantle Chrysler, keeping Jeep, much like the way Chrysler took over American Motors 20 odd years ago. This would mean the death of the Dodge and Chrysler brands, the shuttering of most Chrysler plants and the dismantling of the entire dealer base. Such a plan would raise a lot of questions relating to state franchise laws, and there would likely be a lot of litigation. Prior to the dismantling of Chrysler, the combined entity would have even more political power to demand government assistance in various forms. The Detroit News speculates that such a combined entity would be "too big to ignore." If GM got rid of Chrysler cars and trucks, it would eliminate 1.6 million units of capacity, an amount close to the amount of overcapacity in the marketplace.

Not stated in the Detroit News article is another possibility. GM may want to acquire Chrysler to get Chrysler Financial. If GMAC is terminally ill, GM may feel the need to get a captive finance company on an emergency basis.