Would a GM-Chrysler deal make sense?

Amy Scott Feb 16, 2007
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Would a GM-Chrysler deal make sense?

Amy Scott Feb 16, 2007
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KAI RYSSDAL: Let’s say right up front that both General Motors and Chrysler have issued official no-comments. But earlier this week DaimlerChrysler’s chairman was very much on the record. He said all options to turnaround his struggling company were on the table. Don’t know if that meant he’d sell the Chrysler Group to GM, but it would take care of the restructuing the company announced earlier this week.

Whether it would do anything for GM is another story entirely. Marketplace’s Amy Scott looked into why one very troubled automaker might want to buy another.


AMY SCOTT: Automotive News first reported that GM and Chrysler were talking about a buyout. But neither company will comment and analysts are skeptical.

PETER MORICI: I don’t think this makes a lot of sense unless the purchase price is zero.

Peter Morici teaches business at the University of Maryland. He says Chrysler is burdened by the same labor costs GM is battling.

Erich Merkle with research firm IRN says GM is also struggling with too much production capacity and too many brands.

ERICH MERKLE: What Chrysler would do for them is it would give them more excess capacity and it would give them more brands to manage. It seems like it would be an awful lot to bite off.

Tom Libby with J.D. Power sees one possible explanation for a buyout.

TOM LIBBY: GM wants to remain number one in the world, wants to increase their share and volume in North America to stay ahead of Toyota worldwide, and this is a way to do it.

Even if the two were serious about a deal, former American Motors Company Chairman Gerald Meyers doubts the Justice Department would look kindly on it. He says together GM and Chrysler would dominate 37 percent of the U.S. market.

GERALD MEYERS: And with the Democrat Congress looking over the shoulder of the regulators, I don’t think there’s a chance that Washington will go along with a combination of the two companies outright.

For now, GM and Chrysler may be satisfied with a smaller-scale partnership. News reports say the two are in talks to develop a large SUV. Given the recent decline in SUV and truck sales, analysts question that idea, too.

In New York, I’m Amy Scott for Marketplace.

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