(Corrects spelling of Meyers)
NEW YORK, Oct 11 (Reuters) - General Motors GM.N has had
talks with smaller rival Chrysler LLC about a merger that would
combine the No. 1 and No. 3 American automakers at a time when
both are struggling to cut costs and shore up cash, according
to a source briefed on the matter.
The following are comments from analysts and industry
insiders on the potential tie-up between the two large auto
makers.
Story: [ID:nN11417338]
Take a Look: [ID:nN11313254]
COMMENTS:
PETER DELORENZO, PUBLISHER OF AUTOEXTREMIST.COM WEBSITE
"Beyond my initial reaction -- which is flat out lunacy --
the only scenario I can come up with is that GM would take over
Chrysler in a defensive move to keep Nissan-Renault (RENA.PA)
from getting their hands on it.
"Once you get past the flat-out absurdity part of it, it
really doesn't hold together, because ... here's a company with
too many models, too many divisions and too many dealers; the
last thing GM needs is more of that by a bunch.
"Short of shutting Chrysler down, merging Jeep and Hummer,
taking the minivan franchise, there's no other part of Chrysler
GM needs. They don't need Dodge. They don't need more trucks.
"Cerberus wants out. It's real obvious."
"The only real outside company is Nissan-Renault. I really
don't think the others make sense."
"It's all from the Cerberus perspective from what I can
gather because despite their public pronouncements, they've
been crying 'uncle' internally for eight months now. They
realize that they did the dumbest thing they could have done at
the exact worst moment in history and they're just trying ...
to get out of it and save some face."
"You could easily see Pontiac and Dodge going away."
"If it is a takeover, I see two things: Jeep and the
minivan franchise. Once you stop there, boy, the rest of
Chrysler would be decimated, huge job losses. It would be
unbelievable."
* Regarding possible GM bankruptcy and access to
low-interest government loans - "I didn't really take the
imminent bankruptcy scenario that seriously. I really do
believe that GM has at least 16 to 18 months to show some signs
of revival.
"Separately, if they figured they could get access to that
kind of a quick loan, they will take cash wherever they can get
it at this point if it's at a favorable rate."
"That would open up a Pandora's Box because Ford would say,
'Well, heck, if you're giving GM money, then give us some
too.'
"I really think Chrysler's as good as gone. It will not be
in its current configuration by next June 1. It will be either
partnered up with somebody, Cerberus will sell it or they will
parcel it out. They want out of it as soon as they can."
GERALD MEYERS, PROFESSOR AT THE UNIVERSITY OF MICHIGAN
BUSINESS SCHOOL AND CEO OF AMERICAN MOTORS WHEN IT OWNED JEEP
IN THE EARLY 1980s
"On the surface of it, anyway, it's a good idea. Cerberus,
to begin with, is impatient money. Their way of operating is to
get in, make a killing and get out.
"Well, they got in, they got killed and they've got to get
out. It makes sense.
"If they can find a buyer at General Motors, that will be
delightful for them even though they won't get their money
back. They won't accomplish their objective. On the other hand,
they won't go down in flames. They'll just unload the thing,
just like Daimler did. It's a game of dominoes and dumping.
* Does deal make sense? - "If GM can get hold of the good
pieces and let the rest go, yeah, sure.
"The most attractive thing to GM is the volume and the
revenue. They can pick up maybe 8 or 10 percent of the market
overnight and suddenly they're the biggest carmaker in the
world. They like that. That's assuming they can get rid of the
things they don't like."
* Would it mean job cuts? Plant closures? - "It certainly
would; unless they can carve it up and sell pieces themselves
to, let's say, the Chinese. If they can't carve it up, they're
going to have to get rid of it."
"One of the big problems that's often overlooked in the
industry is that there's too much capacity. Particularly during
a recession, there's much too much capacity. How do you get rid
of it? One way is to kill one of your competitors. Buy them up
and get rid of them, and sell them off."
* Shutting down capacity? - "Everybody would sigh in
relief, except for the people that lose their jobs. That will
hurt. It will particularly hurt the Midwest and southeast
Michigan."
"It's not a natural marriage unless they can handle more
brands. GM already is trying to handle eight brands. That's too
many. If they pick up three more, they would have to get rid of
something because that's one way they would get the costs
down."
* Regarding low interest government loans - "There's no
reason why they shouldn't approach them. If they can get free
money, they'll grab it and run."
"The talk of bankruptcy is very thin. Bankruptcy is
triggered by a loss of liquidity. At the moment, for the next
18 months to two years, GM does not have that problem. They've
got plenty of assets they can sell off and they're starting to
sell them off.
"It doesn't help sales to have that talk going around."
* Other potential buyers? - "There are others where it
makes more sense. It makes more sense for Chrysler to tie up
with a Chinese company. The Chinese badly want into this
country. They want the distribution system, they'll even want
some of the manufacturing plants and they would like the
products. They would still cut Chrysler down, but they would
welcome a cheap Chrysler if they could get it.
"The French business people are funny people. They are
inclined to pick over the bones. They like to be the boss and
they usually don't give any ground anywhere. Making a deal with
them is very difficult."
MICHAEL ROBINET, ANALYST WITH CSM WORLDWIDE, AN AUTOMOTIVE
RESEARCH FIRM IN NORTHVILLE, MICHIGAN
"There is a lot of overlap between GM and Chrysler's
footprint, their vehicle portfolio as well as their dealer
coverage.
"The additional bandwidth that Chrysler would add to
General Motors is not immediately apparent.
"It may be easier for them to consolidate Chrysler into
their portfolio rather than the risk of continuing to have 49
percent share in GMAC.
"It makes sense for Cerberus because it gets them out of
the car-making business and keeps them 100 percent in the
financing business, which is an area they understand better.
TIM GHRISKEY, CHIEF INVESTMENT OFFICER WITH SOLARIS ASSET
MANAGEMENT IN NEW YORK
"In any combination like that, you create a stronger
entity, rationalize manufacturing, rationalize product lines.
It will certainly mean job cuts, which none of us like but is
the way of the world, and other cost cuts.
"The only way you do this is if you could make significant
cuts."
(Reporting by Ben Klayman in Chicago)
