GM-Chrysler: Merger Mania Is Here
Over the weekend I was able to find some time to sit down and read a number of articles discussing a possible General Motors-Chrysler merger and had to grin whenever I came across a story from someone who was surprised that this sort of business consolidation was even being discussed. A 
generation ago I would have said “nuts” to do that idea myself, but we live in different times.
Chrysler and General Motors — Merger or Partnership?
Although I don’t know if Chrysler and General Motors will eventually hook up, I believe that within the next decade the number of major automakers on the scene will shrink considerably as global consolidation forces companies to look for partnership opportunities wherever they can.
Last December, I threw out the possibility that Ford and Chrysler might merge and followed that up with articles about a possible Chrysler-Nissan-Renault partnership taking shape. In my opinion, Cerberus’ desire to maintain Chrysler is limited, something they’d probably trade away if they could snap up the remaining shares of GMAC in exchange for GM taking over Chrysler’s automotive operations.
Ford Is Shopping Its 33.4% Share Of Mazda
Now we have word that Ford is interested in selling off its share of Mazda, the Japanese automaker whose platforms underpin some of FoMoCo’s cars and SUVs including the European Focus, Escape, and the Fusion. Also, talk of Ford selling off Volvo still receives plenty of attention, and getting rid of its outside operations would generate a lot of cash for the Blue Oval.
On the other hand, I think Ford should keep Mazda and Volvo, and consider forging an alliance with at least one other automaker, perhaps Volkswagen, to jointly build and market some cars. At some point, I expect that Ford will be bought out or merged into another company.
BMW and Mercedes May Collaborate
Mercedes and BMW, who have long battled for luxury car supremacy in the US, may also be looking to forge some sort of partnership, at least according to what Motor Trends has to say. Arch-rival Volkswagen Group has the sales edge on its German cousins, and is looking to expand its Audi production to take on BMW and Mercedes directly. Both manufacturers could possibly benefit from sharing engine technology which can save the companies billions in powerplant development.
Cash Rich But Not Interested In Acquiring?
Toyota and Honda are likely the two wealthiest automakers in the world, with lots of cash on hand and the wherewithal to gobble up other companies. Toyota already owns Daihatsu and shares of Suburu and Suzuki, but would they be interested in extending their reach to buy out Ford’s share of Mazda or would that be something Honda would take on?
Given that neither Toyota nor Honda is in desperate shape, taking on someone else’s problems isn’t something either would be inclined to do. In Mazda’s case they’d still have to contend with Ford as Mazda and Ford jointly own a number of manufacturing plants and develop several cars together, a relationship neither company would want to unwind. Honda and Toyota might find taking on Mazda to be a drag on their businesses which are succeeding without need to acquire other companies.
Possible Business Deals Instead
Instead of outright mergers or acquisitions, the world’s automakers have another option which Japanese automakers have been doing for some time: build cars for one another. In the US, Chrysler is already building the Routan for Volkswagen and inked a deal earlier this year for Nissan to supply several vehicles to Chrysler as well as for Chrysler to supply the platform for the next generation Titan pickup truck.
Other possible relationships which could come up include:
- GM offering a small car to Chrysler, perhaps a badged Chevrolet Cobalt. In exchange, Chrysler could badge its minivan and allow GM to sell it as a Pontiac. Chrysler has no small car that can get better than 31 mpg, while GM now lacks a presence in the minivan market. Also, GM could supply Chrysler with six-speed automatic transmissions, the same transmission family jointly developed with Ford a few years ago.
- Any number of foreign makes could share a US plant with one of the Big Three to jointly develop new product that both can sell stateside. Or, a foreign brand could take over an existing Big 3 plant or revived a closed facility for their own uses.
- Tata Motors wants access to the US market. Why not have GM sell Hummer to Tata which would give the Indian automaker instant access to the market, just as competitor Mahindra & Mahindra establishes its own presence in the states.
Are Blockbuster Mergers Possible?
If the market continues to slide, all bets are off. It could take a blockbuster GM-Ford-Chrysler merger to iron everything out, an unthinkable action just a few weeks ago. Naturally, European anti-trust people would have to sign off on the deal, perhaps requiring that the combined entity sell off some assets (or a brand) to a European company. The US might be receptive to this sort of deal, given the current economic climate and a desire to retain at least some manufacturing jobs in the states.
Ultimately, consumers can expect more changes in the months ahead, as companies seek to survive the worst economic tailspin since the Great Depression. While a formal Chrysler-GM merger might not work, some sort of alliance could be in the best interests of both parties. These days make for interesting times, an era in history where businesses are merging or converging at the most rapid pace ever.
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