Treasury Blocks Merger

[The_Blur]

The US Treasury denied a $10B loan necessary to make the merger between Chrysler and GM take place. The money would have been a loan that the new GM-Chrysler entity would pay back over time. The apparent alternative is a Nissan-Renault-Chrysler entity, making Chrysler an American-French-Japanese mutt. Article is by Leftlane.

Instead of just discussing as usual, I want to pose a question: why would the Treasury see domestic market consolidation as a bad idea? It would save millions in redundant funds, and Chrysler being owned internationally would send a lot of US consumer dollars abroad.

[camaro5]

"With auto sales plummeting globally, analysts say the merger would save the companies billions of dollars in redundant expenses.

But that would also mean tens of thousands of jobs lost. Analysts have estimated that the total job loss in a GM-Chrysler merger could be as high as 90,000."

This is what worries me.

[kevin2323]

they are holding off till after te election so dont count the merger out just yet...

[The_Blur]

Originally Posted by camaro5

"With auto sales plummeting globally, analysts say the merger would save the companies billions of dollars in redundant expenses.

But that would also mean tens of thousands of jobs lost. Analysts have estimated that the total job loss in a GM-Chrysler merger could be as high as 90,000."

This is what worries me.

If Chrysler gets taken off the market, more employees than that will lose their jobs. I'd rather have the company stay afloat as part of GM where it can maintain its American roots than be bought and sold by the international market. I know that tradition isn't always good for business, but I want the company that owns some of America's greatest heritage machines—Viper, Challenger, Prowler, Wrangler, Charger, Rubicon, Coronet, SRT, Magnum, Barracuda, PT Cruiser, Ram, 300, Liberty, plenty of others—to stay American. If 90k people lose their jobs by GM's acquisition of the company, it is far better than every single employee of both companies losing their jobs due to bankruptcy. Together, their redundancies will require some serious surgery, and a lot will go away. That will eventually include employees, products, and entire branches of the corporate hierarchy.

Basically, Chrysler is in a very bad place. A lot of people will lose their jobs in any change of ownership. GM and Chrysler have a lot of product overlap, so I expect a lot of people to lose their jobs to reduce the redundancy of products. While Chrysler might fit better with a company that could use better trucks, SUVs, or some American heritage brands, I feel that such a heritage as this belongs with an American company, where American muscle began.

Originally Posted by kevin2323

they are holding off till after te election so dont count the merger out just yet...

The problem is that Chrysler's ownership is eager to get out of the business. They want nothing to do with cars, so they are willing to liquidate Chrysler to anyone. In this case, it could go to Nissan, which would make Chrysler foreign. The next President can't take office soon enough for this merger to potentially take place. A lot can happen between November and January.

[Inspector 17]

It could have gotten turned down because the specifics of the deal. Having been through a bunch of mergers (including one giant one) in a different industry, regulators are quirky about making sure the details of the deal are in the best interest of the US (at least in theory).

[The_Blur]

Originally Posted by camaropete

It could have gotten turned down because the specifics of the deal. Having been through a bunch of mergers (including one giant one) in a different industry, regulators are quirky about making sure the details of the deal are in the best interest of the US (at least in theory).

So what specifics do you think the Treasury opposed?

[headpunter]

Originally Posted by The_Blur

So what specifics do you think the Treasury opposed?

one part is that GM needs to own less of GMAC

[The_Blur]

Originally Posted by headpunter

one part is that GM needs to own less of GMAC

Of course, part of the deal is that GM would liquidate its GMAC assets. Wouldn't the deal resolve this problem? Should GM just give up GMAC and then ask for the money? That's like paying the tip before you get your meal. It just doesn't make sense to me.

[DGthe3]

Originally Posted by The_Blur

Of course, part of the deal is that GM would liquidate its GMAC assets. Wouldn't the deal resolve this problem? Should GM just give up GMAC and then ask for the money? That's like paying the tip before you get your meal. It just doesn't make sense to me.

I think part of the basic problem is that GM asked for 10B to get 12B from Chrysler. Super over-simplification, but I can see how it would be frowned upon.

[Inspector 17]

Originally Posted by The_Blur

So what specifics do you think the Treasury opposed?

Well, based on what I have seen in the past perhaps plant closings, layoffs, management team, debt load, etc.

[rlg3]

Several media reports are reporting the the Federal Government is not going to offer a bailout plan for GM like it did for AIG, and several wall street firms.

If they the government doesn't bailout out GM what is GM's future?

[StuMac]

The media doesn't even know who will make up the government when GM is projected to run out of money if nothing changes, how can they know it won't get bailed out?

[kanys]

Hmmm, well I was almost expecting this considering they are not completely desperate, but if the Traverse and Camaro do not sell well the first few months then they may be... Hopefully the Government will re-examine a bailout for GM if that does occur. However IMO GM definately has the good ideas and the good employees to make these ideas reality that I think they will come out just fine!

[stovt001]

Originally Posted by kanys

Hmmm, well I was almost expecting this considering they are not completely desperate, but if the Traverse and Camaro do not sell well the first few months then they may be... Hopefully the Government will re-examine a bailout for GM if that does occur. However IMO GM definately has the good ideas and the good employees to make these ideas reality that I think they will come out just fine!

You can have all the great products you want, but the fact is that the entire auto market is down. No one is buying no matter how great the product is. Unfortunately, the market may not recover before GM's cash runs out and before the cost savings of the new union contract kick in. It is really impossible to say right now because it all depends on who gets elected to what offices. This isn't just about the President. Its about Congress, the courts, and who they all put in the top government posts.