http://www.msnbc.msn.com/id/17333246/

DaimlerChrysler is considering taking a minority stake in General Motors as payment for Chrysler if a deal between the two carmakers goes ahead.

According to people familiar with the situation, the Stuttgart-based German-American carmaker is weighing this all-share option.

I wonder if there is any truth to this, or if this story is taking on a life of its own.

 

This is jist a bad idea all around no matter how it could come to be. I hope this is just bad press or speculation. GM and Chrysler together woudl equal the death of one or both and overall more jobs lost due to overlap. Let Magna buy into Chrysler they would do a better job and it would keep the company going instead of floundering inside GM.

The same reason I don't go and buy a Ferrari is the same reason GM shouldn't buy into Chrysler. Fiscal responsibiliy, it has never been embraced in Detroit and thats one of the reasons the domestic brands like Chrysler are up for sale.

 

Just the rumor of the day in this DCX saga. I predict in the end they won't sell Chrysler...this is just a fishing expedition.

 

How to take control of the North American auto market:

1) Get GM to take over Chrysler in return for a 20% stake
2) Let the incompetents at GM burn through all their cash getting rid of the 99% duplication
3) When GM needs more money, just take an increased stake again
4) Pretty soon Daimler will have more than 50% of GM and effective control of maybe 30% of NA.

On the other hand, if GM actually pulls off the merger, Daimler can sell their stake for big profits.

 

One of the neet things in all this press speculation is that none of these people writing this is considering what has to be done in order to pull off something like this. If they did, they wouldn't be treating this as if it's likely to happen (the old snowball in hell analogy comes to mind).

AMC was essentially owned by the troubled Renault, and had quite a large liability, but had the very lucrative Jeep when the flush-with-cash Chrysler corperation bought them in the late 80s during Iaccoca's buying spree.

Chrysler was arguably one of the most undervalued companies in the US, and had a pretty staggering financial warchest when equally well off Mercedes Benz conned stockholders with the "Merger of Equals" sales job that was supposed to benefit both (Chrysler would get a much needed boost in quality & MB would streamline their vehicle development) turned into a takeover and virtural gutting of Chrysler with the cash going to Germany and the ownership of the lucrative now-more-than-ever Jeep brand.

Today we have a GM that although is doing far better than a couple years ago, is still hemmoraging money and is scrounging every penny to go towards new products and a Chrysler division that has only been in the red for less than a year and has almost the same market lineup as GM.

Yet, GM is going to blow a whole wad of cash or stock value for exactly what?

Market share?

GM answers to a group called stockholders. Stockholders could give a rats a** about market share unless it boosts their earnings. Sure, GM would gain market share, but their earnings sheets would look like a war zone.

To dismantle the competition?

GM took a serious financial hit just dismantling the by-then small chips Oldsmobile division. Imagine the financial hit GM's going to incur by dismantling a company that's bigger than every other one of the dozens playing in the US save 2 or 3.

Get Chrysler's development money?

Chrysler probally spends less developing new vehicles than anyone in the US. A fact made even moreso because of Daimler's pressure. To make things sound even more unlikely, GM is libel to spend far more in legal costs and paying off Chrysler's liabilities than they will ever squeeze out of Chrysler by buying the whole thing.



I CAN see GM making a play for Jeep. I can also see GM going into joint development with Chrysler on small cars or trucks. I can even see GM and Chrysler combining resources on a new generation of V8 engines or some automotive subsystem or component set. But blowing up all of this into GM buying Chrysler outright is a pure fantasy to sell papers IMO.

 

That would be a nice way to stop the Chinese and Korean companies from making headway in the US.

 

Sure, it makes no sense from an operational perspective. But you can say the same thing about AOL and TimeWarner, HP and Compaq, and many other corporate mega-mergers.

Wall Street still loves the megamerger -- not only does it make them rich from all the merger costs, it keeps the shareholders off management's *** for 2-3 years while they write off everything they can think of.

I wouldn't write this one off totally on the press -- GM management would be dumb to not consider this an "out" from all their immediate problems.

 

I say GM will buy Jeep and have a stake in DCX some way that makes it profitable for both companies.