GM Chrysler deal close... 10/29/08

[StRacerDuke]

http://www.reuters.com/article/newsOne/idUSN2735477920081029

NEW YORK/DETROIT (Reuters) - General Motors Corp and Cerberus Capital Management have resolved the major issues in a proposed GM-Chrysler merger but the final form of any deal will depend on the financing and government support available, sources familiar with the talks said on Wednesday.
Both sides have agreed that GM Chief Executive Rick Wagoner would lead the combined automaker, the sources said. A merged GM/Chrysler would be the largest automaker by global sales.
As GM seeks some $10 billion in U.S. government aid to support the deal, Chrysler owner Cerberus is in its own set of intense discussions with banks to refinance $9 billion of Chrysler debt, the sources said.
The lending consortium -- which includes JPMorgan Chase, Goldman Sachs Group, Citigroup Inc and Morgan Stanley -- has not made a decision yet and talks are complicated because lenders have sold part of the debt to other investor groups, the sources said.

[maldo]

This is a kind of sore subject with me because I am a GM guy at heart but, then again I don’t feel bad for them.

For years they shot themselves in the foot while others where coming out with new models. (Example Ford, Chrysler seemed to have their finger on the young buyers with cars like the new retro style of the mustang and Charger which were well done offering good performance per dollar value…(these cars are easy to live with everyday and affordable (on the other hand what did GM offer nothing in that area expect for the Vette and a few front wheel drives on top of the big pony car crazy what did they do Killed the Camaro/Firebird ... with no real replacement how stupid could they be .. yes they did come out witht he GTO but a 35g + it was not really a young buyers car.. (in my opinion the camaro is a great car but not a everyday car (yessss I have owned many of them from 2nd 3rd and 4th gen cars…. And the low sitting position, long dash, and long doors make it a no no for everyday you 4th gen guys now what I am talking about that’s why you see every 4th gen car with ripped side bolsters lol) This is one of many examples GM dropped the ball for buyers..

I remember when the GTO first came out I was so excited (at the time i was keeping track of all the aussie cars and could not wait for it to come to our shores I thought this would change the battle grounds for gm in the performance sector because know I thought I could get an America car with a v8 6speed in a some what sophisticated package like BMW had been making for years. But when I went to go buy one they were over bloated in price etc…. so I gave the finger to GM hung on to my 11 year old Z/28 and bought something else for everyday use. They have always been behind the 8 ball with cars and what people want.


They stick to front wheel drive rent a car style of cars …. While the Japanese, Germans have pulled away from all that with quality, performance and style etc….. (if you don’t believe me look at the resale values for America car vs. the japanese German cars….. also look a 10 year old American cars vs a Japanese or German car the America cars fall apart interior rattles squeaks etc…..

Then one thing GM has hands down is a great v-8 power train their LS engines are top notch …. That’s why you see 7 out of 10 performance cars with a Chevy Engine…


Yes the GM has come a long way with quality and styling but they have not yet gone to the next level in my opinion they always seem to react to the market demands then set the standards.

Again I want to point out I am a GM guy and I hate bashing them but it’s sort of like a football team that keeps losing …. To me they need a shake up --- wake up whatever you call it .. It does not matter if they merge change their name go green etc if they don’t
Stop dragging their feet and give buyers like me what I am looking for I am not going to run down to a Gm dealer and plunk down my hard earned money for a new car every 5-7 years ….. I will hang on to my classic Gm Muscle car and drive competitor’s car for my everyday car ….

The One i cant understand is that they do such a good job with the vette market and costumers needs in that area why cant they apply the to every other part of their car models ????

[406 Q-ship]

I just can't see how this is going to help GM. GM will get struck with a whole lot more of legacy cost with Chryslers retired and retiring workers. Product over lap is going to be killer too. Great GM now will have 3 lines of full size truck.

[Boyd]

IMO, this had to happen. The only issue I have with it is that Rick Wagoner will remain CEO of the new company. He's a terrible leader that couldn't sell seal skins to eskimos.

Detroit needs to go back to having car guys run the car companies. I'd hire Jay Leno to run the new company and put Chip Foose in charge of design.

[maldo]

IMO, this had to happen. The only issue I have with it is that Rick Wagoner will remain CEO of the new company. He's a terrible leader that couldn't sell seal skins to eskimos.

Detroit needs to go back to having car guys run the car companies. I'd hire Jay Leno to run the new company and put Chip Foose in charge of design.


dammm that would be nice to have someone like chip foose in charge of design imagine that .... can you imagine if chip got his hands on a simple car like the impala what he could do with it .... hmmmm i vote yes

[Damn True]

....and it'll only take $10M of our money to get it done.

IMO the Govt should tell them to either file bankruptcy so they can dump the debt and legacy costs or they should be allowed to fold.

This should not be my problem.

[StRacerDuke]

Agreed, after looking at their financials I have to say bankruptcy is the best option for them. Two horrible companies that can't stand on their own forming one company where they are going to lean against each other for support. Yea, I don't by it. File BK, cut out 65% of the crap, break the union contracts, off-load the pensions to Uncle Sam, and re-write the business plan.


I just can't see how this is going to help GM. GM will get struck with a whole lot more of legacy cost with Chryslers retired and retiring workers. Product over lap is going to be killer too. Great GM now will have 3 lines of full size truck.

[StRacerDuke]

Also an interesting note. Hotwheels (Mattel) is worth more than GM is at the moment.

[Boyd]

Also an interesting note. Hotwheels (Mattel) is worth more than GM is at the moment.

Well duh, their cars are a million times cooler than GM's! Of course, they don't have to limit their designs because of government safety standards.

About the merger; I'm not exactly thrilled that taxpayers will be footing the bill, but without it, there is a chance that either both companies will fail, or both companies will be seperately bailed out - both of which would end up costing ALOT more than $10B. America doesn't need either one of those to happen. There just isn't room anymore for 3 poorly run domestic car companies in the US.

IMO, the merger is the best case scenario if it's managed correctly (not likely to happen with Wagoner still in charge).

[maldo]

Well just think about it Harley Davidson and Chrysler was at that point at one time the gov bailed them out and when the company got back on their feet they gov made their money back and more. ... maybe that can play in our favor .... or maybe not who knows...

Where are all the freaking smart people out there they all seem to be a bunch of idiots who are running these companys with no far site ... **** i am not the smartest person in the wold but even i know you have to make a product that someone likes to stay in business... why are these executive making all this money and bonus private jets etc if they cant produce fire their asses bottom line get someone who can do the job and do it right... they need to start taking responsibility for their actions...... to make things right....

[1969CamaroRS]

....and it'll only take $10B of our money to get it done.

IMO the Govt should tell them to either file bankruptcy so they can dump the debt and legacy costs or they should be allowed to fold.

This should not be my problem.

Fixed it for you. Well said.

[Alan66ss]

If they go into bankruptcy and they dump at least the pensions off then the government will pick it up. So the tax payers will foot the bill either way.

[Damn True]

Who says the govt has to pick up the pensions?

Let the UAW cover them.

[Boyd]

Several years ago, the government passed a law and created a pension guarantee fund. The law was intended to discourage corporations from filing bankruptcy to avoid paying pensions. The fund was set up to cover all of the misfortunate souls whose company couldn't avoid bankruptcy for legitimate reasons. So yes, the taxpayers will foot the bill no matter what.

[JWilson]

Sorry, double posted.

[JWilson]

We, as a country, don't need to be in the car business on top of everything else "we" have become owners of lately.

I have always been a Chevy guy, but either hire somebody to run the company properly and profitably, or fold it up. I know they are a large company, but it can be done. I know nothing about Rick Waggoner, but as CEO he works for the shareholders, and how shareholders have not shown him the door given stock price, which is how CEO's are measured, I do not understand.[/quote]

[trapin]

If GM and Chrysler fold you WILL feel the effects in your neck of the woods. Like it or not. And it won't be a love tap either.

Put aside your feelings for Rick Wagoner and the rest of the people running GM and think about the millions of jobs that will be directly and indirectly effected should these two companies fail.

This isn't about saving the necks of a few millionaire executives...it's about stopping the knife from being driven any further into the heart of this country's economy.

Put your hate in a shoebox and keep it on top of the refrigerator for the time being. When we get back on our feet then you can bring the hate to your heart's content. And I promise I'll be quiet. :)

[WS6]

We as a country need to get back into manufacturing and hold on to any manufacturing we still do. I'm not going to go into the reasons why we have slowly lost that edge or that industry. All that matters is that we have to get most of our goods from other countries. What will we do if those other countries decide they no longer want to sell to us?

"f*ck the g rides, I want the machines that are making them"

[BonzoHansen]

Who says the govt has to pick up the pensions?

Let the UAW cover them.The PBGC picks them up. Then again I think you know that. I sense sarcasm. :)

[Tony_SS]

I'd say they better use some of that 850 billion to help out GM. If my tax dollars are going to bail out other private business already, it only makes sense to prop up GM as well.

[Mathius]

I'm confused by a lot of what I'm reading here. I'll admit I didn't read the linking article, just the quote, but most of the posts here seem to be leaning negatively against GM. While I agree their designs have been bad and they've made stupid decisions, initially this was being reported as GM buying out Chrysler, leaving me with the impression that Chrysler was suffering more out of the two.

So what is the case then? Who initiated the merger, and who will benefit more?

Also, what is the nature of the merger? Will they remain apart, much like Mercury/Ford, Daimer/Chrysler, etc? Or will Chrysler just desolve into another branch of GM like Pontiac or Saturn?

I had thought Chrysler was doing quite well for themselves with all the new stuff they had out like the Charger, Challenger, etc.

Can someone basically outline this stuff?

Mathius

[WTRacing]

This is a kind of sore subject with me because I am a GM guy at heart but, then again I don’t feel bad for them.

For years they shot themselves in the foot while others where coming out with new models. (Example Ford, Chrysler seemed to have their finger on the young buyers with cars like the new retro style of the mustang and Charger which were well done offering good performance per dollar value…(these cars are easy to live with everyday and affordable (on the other hand what did GM offer nothing in that area expect for the Vette and a few front wheel drives on top of the big pony car crazy what did they do Killed the Camaro/Firebird ... with no real replacement how stupid could they be .. yes they did come out witht he GTO but a 35g + it was not really a young buyers car.. (in my opinion the camaro is a great car but not a everyday car (yessss I have owned many of them from 2nd 3rd and 4th gen cars…. And the low sitting position, long dash, and long doors make it a no no for everyday you 4th gen guys now what I am talking about that’s why you see every 4th gen car with ripped side bolsters lol) This is one of many examples GM dropped the ball for buyers..

I remember when the GTO first came out I was so excited (at the time i was keeping track of all the aussie cars and could not wait for it to come to our shores I thought this would change the battle grounds for gm in the performance sector because know I thought I could get an America car with a v8 6speed in a some what sophisticated package like BMW had been making for years. But when I went to go buy one they were over bloated in price etc…. so I gave the finger to GM hung on to my 11 year old Z/28 and bought something else for everyday use. They have always been behind the 8 ball with cars and what people want.


They stick to front wheel drive rent a car style of cars …. While the Japanese, Germans have pulled away from all that with quality, performance and style etc….. (if you don’t believe me look at the resale values for America car vs. the japanese German cars….. also look a 10 year old American cars vs a Japanese or German car the America cars fall apart interior rattles squeaks etc…..

Then one thing GM has hands down is a great v-8 power train their LS engines are top notch …. That’s why you see 7 out of 10 performance cars with a Chevy Engine…


Yes the GM has come a long way with quality and styling but they have not yet gone to the next level in my opinion they always seem to react to the market demands then set the standards.

Again I want to point out I am a GM guy and I hate bashing them but it’s sort of like a football team that keeps losing …. To me they need a shake up --- wake up whatever you call it .. It does not matter if they merge change their name go green etc if they don’t
Stop dragging their feet and give buyers like me what I am looking for I am not going to run down to a Gm dealer and plunk down my hard earned money for a new car every 5-7 years ….. I will hang on to my classic Gm Muscle car and drive competitor’s car for my everyday car ….

The One i cant understand is that they do such a good job with the vette market and costumers needs in that area why cant they apply the to every other part of their car models ????

Very well said

[bigvegan]

http://www.iht.com/articles/2008/11/03/business/03gm.php

DETROIT: The Treasury Department has turned down a request by General Motors for up to $10 billion to help finance the automaker's possible merger with Chrysler, according to people close to the discussions.

Instead of providing new assistance, the Treasury Department told GM on Friday, the Bush administration will now shift its focus to speeding up the $25 billion loan program for fuel-efficient vehicles approved by Congress in September and administered by the Energy Department....

[Tony_SS]

http://www.iht.com/articles/2008/11/03/business/03gm.php

DETROIT: The Treasury Department has turned down a request by General Motors for up to $10 billion to help finance the automaker's possible merger with Chrysler, according to people close to the discussions.

Instead of providing new assistance, the Treasury Department told GM on Friday, the Bush administration will now shift its focus to speeding up the $25 billion loan program for fuel-efficient vehicles approved by Congress in September and administered by the Energy Department....

Sounds like they are lining their ducks up. We'll all be driving .gov sponsored smart cars if Congress has their way.

[Damn True]

Can I get a Congressional Coupe with an LS3?

[seekins]

So where is my bailout plan if i run my business into the ground?
At some point, people are going to have to take responsibility for their actions regardless what the outcome is. yes, it will be horrible for the economy to loose all the jobs but expecting a gov. bailout because a CEO makes some not so great decisions shouldn't be a option. Dont get me wrong, i want them to stay afloat. I'm a chevy fan, but if my taxes are paying for their actions it is unacceptable.

Spread that 10billion into small businesses and create other jobs.

[Damn True]

Well the fault is not entirely held by the management of the Big-3. The import manufacturers are playing the game with the deck stacked in their favor.

There is some significantly unfair taxation against the US manufacturers and the labor costs due to the UAW are significantly higher. The labor & legacy costs contribute $3k to the cost of building every American car. I don't recall the differential in tax burden but it is significant.

The above completely obliterates profit.

[Tony_SS]

Can I get a Congressional Coupe with an LS3?

This year White House Motors is only offering their new 0 emission EV Spark Coupe. Available in Silver and Grey.

The LS3 Coupe was nixed due to poor interest because of the $4800/yr carbon credit tax added on.

[seekins]

Well the fault is not entirely held by the management of the Big-3. The import manufacturers are playing the game with the deck stacked in their favor.

There is some significantly unfair taxation against the US manufacturers and the labor costs due to the UAW are significantly higher. The labor & legacy costs contribute $3k to the cost of building every American car. I don't recall the differential in tax burden but it is significant.

The above completely obliterates profit.

I completely agree, I am a manufacture and the costs are out of the world. Nerveless, i too have competition and you have no choice but to try and stay ahead of the race regardless of what product you have. Sometimes you will be up and sometimes down. I'm not going to get into the UAW or other unions (some are needed, but most are just a drain IMO), but Gm tightened the noose long ago and its starting to catch up with them. that was a decision maybe they didn't have control over, but someone did and the results are starting to float to the top.

I am strongly against import and outsourcing manufacturing, but greed has overwhelmed most companies. Imports should be taxed up the wazoo so we can protect the companies here. They need a real fix and throwing money at a problem seldom fixes anything, but bides time

Bandaid's only stick for so long....:hammer:

[bigvegan]

I am strongly against import and outsourcing manufacturing, but greed has overwhelmed most companies. Imports should be taxed up the wazoo so we can protect the companies here. They need a real fix and throwing money at a problem seldom fixes anything, but bides time

Well, half of those legacy costs are due to retiree health care.

Japan doesn't have those because they've got a national healthcare system, so Honda and Toyota save $1,200-$1,500 per car.

"But that's communism and universal healthcare doesn't work."

Oh, wait, Japan's not a communist country, and they've got the longest-lived people in the world.

Meanwhile GM's about to go belly up, and we're not anywhere close to the healthiest nation in the world.

[Damn True]

I completely agree, I am a manufacture and the costs are out of the world. Nerveless, i too have competition and you have no choice but to try and stay ahead of the race regardless of what product you have. Sometimes you will be up and sometimes down. I'm not going to get into the UAW or other unions (some are needed, but most are just a drain IMO), but Gm tightened the noose long ago and its starting to catch up with them. that was a decision maybe they didn't have control over, but someone did and the results are starting to float to the top.

I am strongly against import and outsourcing manufacturing, but greed has overwhelmed most companies. Imports should be taxed up the wazoo so we can protect the companies here. They need a real fix and throwing money at a problem seldom fixes anything, but bides time

Bandaid's only stick for so long....:hammer:

Protectionism isn't the answer either. The taxation should be equal for importers and domestic manufacturers alike.

[seekins]

Protection was probably not the best wording

I was thinking along the lines of making it less attractive to outsource and more attractive to keep the work here in the states.
Enforcing a higher import tax would level the playing field and make it closer to equal. I doubt you will get them to lower tax that's already in existence on the us side.

I sure hope they can work it out for the long run. We do need them to stick around. Its just best to be prepared for the worst.

[Mathius]

Can someone please attempt to answer some of my questions above?

Thanks,
Mathius

[Damn True]

I'm confused by a lot of what I'm reading here. I'll admit I didn't read the linking article, just the quote, but most of the posts here seem to be leaning negatively against GM. While I agree their designs have been bad and they've made stupid decisions, initially this was being reported as GM buying out Chrysler, leaving me with the impression that Chrysler was suffering more out of the two.

So what is the case then? Who initiated the merger, and who will benefit more?
Well GM and Ford both benefit from Chrysler no longer being in play. There will be a bunch of market share up for grabs. There are downsides as well. Mostly involving the dealer network and such. GM will potentially see a large influx of cash if they are able to sell off capital assets (property). They potentially could transfer a lot of their debt to that portion of the company, then divest it and in turn have that now seperate company file bankruptcy.


Also, what is the nature of the merger? Will they remain apart, much like Mercury/Ford, Daimer/Chrysler, etc? Or will Chrysler just desolve into another branch of GM like Pontiac or Saturn? The stuff I've read points to them taking on profitable business units and dumping the junk. They'd probably keep Jeep, the minivans (good sales & profitable liscence agreement with VW) and the drivetrain contracts from the trucks and dump the rest.


I had thought Chrysler was doing quite well for themselves with all the new stuff they had out like the Charger, Challenger, etc. There is a lot of capital investment in the Chally to be made up before the business unit sees a profit. That takes time. They don't have time.


Can someone basically outline this stuff?

Mathius

Best I can do based on what I know. Others may be able to fill in the blanks.

[Boyd]

Mathius,

The private equity firm Cerberus (Chrysler's owners) initiated the merger. They bought Chrysler for pennies on the dollar from Daimler with the intention of slimming it down, making it profitable, and then selling it at a huge profit - then the housing bomb exploded and the economy imploded. They want to dump Chrysler as soon as they can and approached GM with the idea of trading their ownership of Chrysler for the remaining 54% of GMAC (Cerberus already owns 46% of GMAC.) Although Cerberus hasn't asked for any cash, GM is asking the government for $10billion to help them combine the two companies as quickly as possible should the merger occur.

As far as what GM wants to do with Chrysler - I have no idea. I think it would be a mistake to try to run it as another division - in my opinion, that is what has been part of GM's problems - too many divisions and too many platforms competing with each other. It dilutes their design and engineering capabilities.

They need to absorb Chrysler and streamline their product offerings by only keeping the best of each product line:

Kill the Viper - Keep the Corvette.
Kill the Challenger -Keep the Camaro.
Kill the Silverado - Keep the Ram. (The new Ram is better than the Silverado, but the full-size GM Suvs share the same platform with the Silverado - so it's a toss up I guess.)
Kill the Uplander - Keep the Chrysler mini-vans.
Kill the Hummers - Keep Jeep. (but kill the Compass, Wagoneer, and Commander).
Kill the 300 and Chargers - Keep the CST.
Kill the Colorado - Keep the Dakota.
Chrysler's small cars escape me so that means GM should probably keep their own small cars - but they should take advantage of the small diesel technology that Chrysler inherited from Daimler. (Think small DFI turbo-diesels combined with a GM six-speed manual or auto.)
And Kill the whole division of Pontiac - or make it a strictly performance division, meaning every single Pontiac model would be a performance model - Keep the G8, Keep the Solstice, Make a Firebird version of the Camaro, Keep that ugly ass pickup version of the G8 etc, etc.

[martZ]

Well, half of those legacy costs are due to retiree health care.

Japan doesn't have those because they've got a national healthcare system, so Honda and Toyota save $1,200-$1,500 per car.

"But that's communism and universal healthcare doesn't work."

Oh, wait, Japan's not a communist country, and they've got the longest-lived people in the world.

Meanwhile GM's about to go belly up, and we're not anywhere close to the healthiest nation in the world.

I guess Big Goverment knows best

It worked really well in Hawaii too...

http://www.foxnews.com/story/0,2933,439607,00.html


You can't even replace the engine in your car in Japan without permission and inspection from their government. Freedom?????

[BonzoHansen]

Kill the Silverado for the Ram? Ok.

I expect that all GM will keep is Jeep & minivans. I expect all other chrysler stuff to vanish.

[MrQuick]

We are all on a wait to see what happens. They already closed most of the dealerships in my area. They just had a big layoff at SF Chrysler Jeep Dodge and word is they don't have the money to keep up past the new year. GM closed down 2 stores down the block but the Chevy dealer is still holding on.

Historically mergers will kill off some models and consolidate makes but as far as GM totally cutting the Dodge Jeep Chrysler line is highly unlikely but we will wait and see. That's all we can do. Best to prepare and wait then assume and worry.

[Boyd]

Kill the Silverado for the Ram? Ok.

I expect that all GM will keep is Jeep & minivans. I expect all other chrysler stuff to vanish.

I haven't seen the new Ram in person, but all of the automotive journalists say it's head and shoulders above the Silverado. Since the Ram is all new from the ground-up, it would save GM money being that they would not have to develop a new full-size truck for quite awhile. Keep in mind that GM has already announced that they are stopping all development spending in 2009. That means they will be even further behind when it comes time to draw up a new pickup. The only issue I see is the platform sharing of the full-size SUV's with the Silverado. So GM would have to decide which would be a larger net gain. Keep the Silverado and risk losing sales to Ford and Dodge's new designs and also have to play catch-up a few years from now, or keep the all new Ram and figure out a way to make the two different platforms (Dodge truck and GM SUVs)work.

The scale is definitely tipped in favor of keeping the Silverado simply because of the platform and sheetmetal sharing with the Tahoe,Yukon, Suburban - but with GM stopping all development spending in 2009, they could be years behind Toyota, Nissan, Ford, and maybe even Chrysler (if they survive sans merger) in the full-size truck segment.

[Mathius]

Well ok, so it sounds like the buyers from Chrystler bought it with the intention of turning a profit, starting losing money and bailed out by offering a merger...

So I understand that, and I get some of what you guys are saying, but I still don't understand all the negativity towards GM on page 1.

Seems like no matter what they choose to keep or kill, they're the ones making out on this deal.

Mathius

[Damn True]

Woops....not GM

http://news.theage.com.au/breaking-news-business/chrysler-fiat-sign-merger-agreement-20090120-7lpu.html

[trapin]

....and thank God for that.

Hopefully this saves a lot of jobs.