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Thread: GM talks merger with Chrysler

  1. #1

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    Sep 2005

    GM talks merger with Chrysler

    bottom line is that they're just in talks and nothing will probably happen since GM will need sooo much money to merge with Chrysler.

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  3. #2
    4m Milestone Whore Award 20k oo3menace's Avatar
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    Sep 2005
    New Jerz
    This is almost week old news...

  4. #3

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    Sep 2005
    i'm sure i'm not the only one who hasnt seen this news yet

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  6. #4
    Poster AntB's Avatar
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    Jan 2006
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    Quote Originally Posted by NYYDYNASTY View Post
    i'm sure i'm not the only one who hasnt seen this news yet
    x2, I didnt hear about it until this thread!!

  7. #5
    Jr. Member SuperMario's Avatar
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    Sep 2005
    Central Jersey
    You heard it here first....

    ..::In a news casters voice::..

  8. #6

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    Sep 2005
    talks broke down after like two days......

  9. #7
    4m Milestone Whore Award 20k oo3menace's Avatar
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    New Jerz
    Published in the NY Times on Friday.

    G.M. Merger Talks With Chrysler Said to Intensify

    DETROIT — Rick Wagoner is running short of time and options to save General Motors and salvage his legacy as leader of the world’s biggest automaker.

    With G.M. burning through cash and auto sales sinking to historic lows, Mr. Wagoner is pushing hard for a merger with Chrysler — in talks reported in The New York Times a week ago — after testing the waters for a similar deal with the Ford Motor Company.

    The fact that Mr. Wagoner is even considering a merger with one of his cross-town rivals illustrates G.M.’s precarious state.

    Mr. Wagoner, G.M.’s chief executive since 2000 and the chairman since 2003, has not granted interviews since the Chrysler talks were revealed. But Mr. Wagoner and G.M.’s president, Frederick A. Henderson, are convinced that the automaker is in dire need of the cash, additional revenue and cost savings that a merger could provide, according to several people with knowledge of the talks.

    The merger discussions, intended to be private, are gaining momentum as both sides want to reach an agreement within the next two to three weeks, according to people briefed on the discussions.

    Financial institutions that hold Chrysler debt, including JPMorgan Chase and Goldman Sachs, are pressing Cerberus Capital Management, which owns Chrysler, to sell the automaker, these people said.

    In recent weeks, the credit crisis and weak economy have driven auto sales to their lowest levels in 15 years, and ratcheted up pressure on Mr. Wagoner.

    G.M.’s shares sank below $5 last week, as analysts projected that the automaker could exhaust its cash reserves — $21 billion at the end of the second quarter — by early next year and possibly be forced into a bankruptcy filing.

    G.M.’s most actively traded bond was up slightly on Thursday, at 22 cents on the dollar, a sign of investors’ skepticism about the company’s prospects in the near future. G.M. has responded in recent months by announcing sharp cuts to its North American vehicle production that it said would bolster its cash position by $10 billion through cost cuts. It also hopes to raise $5 billion by selling assets like its Hummer brand.

    Shares rebounded on news of the Chrysler discussions, closing at $6.40 on Thursday, up 2.9 percent. But that has hardly alleviated the gloom hanging over G.M. and the rest of Detroit. The company’s market capitalization is just $3.6 billion.

    “This is the worst that G.M. has looked in nearly 50 years,” said David Healy, an analyst with Burnham Securities. “If auto sales stay at this level, they can’t survive for very long.”

    G.M. lost $18.8 billion in the first half of this year. Mr. Healy projects that G.M. will lose $2.9 billion during the third quarter, not including special charges, and its revenues will decline about 12 percent, to $38.5 billion.

    Making matters worse, G.M. is burning through more than $1 billion in cash each month, according to analyst estimates — with no end in sight.

    “Macroeconomic factors could overwhelm them at some point,” said Robert Schulz, lead auto analyst with the Standard & Poor’s credit-rating agency.

    For Mr. Wagoner — an analytical executive and former Duke basketball player who joined G.M. straight out of Harvard Business School — the deepening crisis threatens to torpedo a methodical turnaround plan that appeared promising when he started it three years ago.

    Since 2005, G.M. has cut $9 billion in structural costs and reduced its worldwide employment 18 percent, to 266,000 workers.

    The cuts have been even broader in its core North American operations, where G.M. has reduced its number of employees by about 30 percent, and downsized its annual production by 800,000 vehicles. Its market share has been falling for years, down to 22.4 percent in September.

    Mr. Wagoner also earned credit for negotiating a new contract last year with the United Automobile Workers union that reduced wages for new hires and created a trust to administer health care costs for retirees.

    But shrinking G.M. has not been enough to counteract the effects of rising gas prices on sales of trucks and sport utility vehicles, and tightening lending standards for people who want to buy new vehicles.

    “This has been a period of unprecedented chaos in the auto market,” said David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. “It’s not just G.M. It’s Ford and Chrysler and everybody else.”

    Yet as the leader of the industry’s biggest player, Mr. Wagoner has become the focal point for what’s gone wrong in Detroit.

    “If you start reciting the adversity that’s come his way in the last three or four years, it’s a long list,” said Gerald C. Meyers, a University of Michigan business professor and former chief executive of American Motors. “In order to survive, he has to be hardened. Not get used to it, but not be torn by it.”

    In August, the lead director on G.M.’s board, George Fisher, made a rare public declaration of the board’s support of Mr. Wagoner.

    “These are the toughest times I have ever seen,” Mr. Fisher said. “But we are absolutely convinced we have the right team under Mr. Wagoner’s leadership.”

    The board’s support of Mr. Wagoner will be necessary again, though, if G.M. hopes to close a deal with Chrysler. The board has formed a special committee to study the matter.

    G.M. needs the $11 billion in cash that is currently on Chrysler’s books, and Cerberus is said to be considering a large investment in G.M. stock should the deal be done.

    However, merging with Chrysler — whose United States sales have fallen 25 percent this year — would carry risks for G.M.

    To get Chrysler’s cash and revenues, Mr. Wagoner would be trying to meld two organizations with overlapping brands.

    In addition, he would have to drastically reduce Chrysler’s manufacturing capacity and employment, and absorb billions of dollars of its outstanding debt.

    The possibility of a merger is still considered 50-50, according to people briefed on the talks. Cerberus is said to be considering other possible partners for Chrysler, including the alliance of Nissan Motor of Japan and the French carmaker Renault (the two companies develop vehicles together and hold cross-ownership stakes).

    Mr. Wagoner had an opportunity to acquire Chrysler in 2006 before it was put up for auction by its owner at the time, the German automaker Daimler.

    But Mr. Wagoner showed minimal interest then, and he also rejected a chance for G.M. to join the Nissan-Renault alliance, vowing that G.M. could turn around its business on its own.

    Now Mr. Wagoner, 55, faces the prospect of cutting a deal for Chrysler or perhaps another automaker — or possibly going down in history as the executive who presided over G.M.’s demise.

    Adding Chrysler and its cash hoard could give G.M. some breathing room until the auto market recovers. “In this case, money is time,” Mr. Healy said.

    Industry experts now predict that auto sales in 2009 could be even worse.

    One critical factor in G.M.’s favor could be the availability of $25 billion in federal loans for automakers to retool their factories for the production of more fuel-efficient vehicles. The loans could free up cash already earmarked by G.M., Ford and Chrysler for alternative-fuel projects.

    Analysts say G.M. and the other automakers may also be preparing to ask for additional financial help from the government, after the Nov. 4 election.

    “The big question is whether the government is going to let G.M. or other industry members fail,” Mr. Cole said.

    People close to G.M. say they do not believe Mr. Wagoner’s job to be in jeopardy from his board, which has been holding weekly conference calls since the summer to monitor the company’s performance.

    Indeed, the greatest risk may be to the company, not the person running it. “In any other situation where the results are as poor as they are in this business, the board would have long ago let him go,” Mr. Meyers said. “But it doesn’t do any good to fire the chief executive now because the next guy in is not going to do any more to save it.”

  10. #8
    4m Milestone Whore Award 20k oo3menace's Avatar
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    New Jerz
    This was published on Saturday by Associated Press.
    Worries grow as GM-Chrysler talks gain momentum
    AP Auto Writer

    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 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."

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