The General Motors conundrum

According to the London Times, a fairly reputable paper, the CEOs of GM and DCX have indeed met over the possible $13 billion sale of Chrysler Group.

Why would GM be interested?

1. GM would be devastated if a Chinese company bought Chrysler. That would give a Chinese manufacturer access to state of the art automotive technology - despite what Mercedes loyalists claim, Chrysler is at the state of the art of computer design, flexible manufacturing, transmission engineering, and certain other key technologies. It would also give them recognizable brand names and a huge dealer base. Consider the impact on the American economy. Now consider how hard it would be for GM to compete with people who can rely on assembly plants with no pensions, no health care costs, and wages that no illegal immigrants would work for.

2. GM would remain the world’s largest automaker for a while longer, despite Toyota’s expansion, and despite cutting back on fleet sales.
3. GM would save a lot of money by being able to merge HR, finance, and other departments; and by getting bigger economies of scale in areas where GM’s sales are not especially large. Because there IS a lot of duplication between the companies, GM could eliminate quite a bit of Chrysler’s costs (or its own), without any visible changes to the buyers. It’s not unlike the plan to standard Chrysler and Mercedes on common engines, except that it makes more sense, because Mercedes will have to make a bunch of changes to pretend they aren’t sharing anything.
4. GM would, for less than the cost of engineering two new vehicles, get four new vehicles that they do not directly compete with: the Jeep Wrangler, Liberty, and Grand Cherokee, and the minivans. All are perennial good sellers, and would sell better if made by an American company that supported them in word and deed, rather than a German company that denigrated them as inferior to real German vehicles.
5. GM might just want to buy Chrysler out of a desire to see it back in American hands.
6. Bob Lutz might want to save Chrysler either to work on it himself - he was, after all, the best choice to lead Chrylser back in the 1990s, and the #2 man during the rennaissance.
7. GM could get a load of technologies that complement their own, such as a better MDS, six-speed automatics they wouldn’t have to share with Ford, automated-manual transmissions, flexible manufacturing techniques, and more.
8. It might give GM’s culture a quick kick in the pants that could save the corporation.
9. GM’s reach in international markets could really help increase sales of Dodge, Jeep, and even Chrysler vehicles.
10. Once the sneaky accounting tricks are eliminated, as well as the foolish “make ourselves look good” moves like the sales bank, Chrysler will probably be a profit powerhouse again.

Now, why might GM not want to do this?

1. It would be even harder to maintain the General’s many brands.
2. That’s $13 billion that could be spent elsewhere. That kind of capital isn’t free even for the world’s largest automaker.
3. Lutz just said minivans were passé.
4. Someone else might out-bid them.
5. It would bring leadership and management issues, cultural and process, financial and otherwise, that would be hard to deal with while still bringing the great ship around.
6. Nobody in their right mind would trust Daimler to treat them fairly in a deal like this.
   Of course, Bombardier did win quite a bit of cash after the AdTranz deal, so a company with a battery of smart lawyers might be able to take advantage of Daimler’s greed and alleged dishonesty.

As for duplication of product lines, there really isn’t as much as people have suggested. Jeep and Hummer occupy different turf; and there’s no GM equivalent for the Caliber/Compass/Patriot, or Chrysler equivalent of the Cobalt. The mid-size cars are an issue, but they can be eliminated - or kept for a few years if sales merit it. The rear-drive cars are also an issue, but again, they can be eliminated - or kept, since sales are high enough to justify having two rear-drive platforms, until they can be merged. Minivans are at Chrysler, not GM; CUVs are currently at GM, not Chrysler, except Pacifica. PT’s days are numbered, so that’s not an issue; that really leaves pickups, where the Ram sells enough to be kept on as a separate line (with slow sharing with Silverado over time), the Dakota has no direct GM counterpart, and the Durango is due to be axed anyway.

It would work, and frankly, I’d rather see Chrysler under GM than under Mercedes any day. At least they’d be run from the nation they serve, and there would be less room under American accounting laws for the kind of trickery Mercedes has been repeatedly accused of.