The Auto Writer

General Motors may be interested in buying Chrysler LLC, but their desire seems to be for the company's minivans as well as for the Jeep brand including the pictured Jeep Wrangler.

The more I read about the proposed merger of General Motors and Chrysler, the less I like about the deal. It isn’t so much that I think a bigger General Motors wouldn’t be okay, but I just don’t see how GM could pull this off without massive federal intervention.

Too Many GM Brands To Manage

It seems that I’m not the only one who is thinking this way as auto writers and pundits all around the globe are saying pretty much the same thing. GM already has too many brands to manage and can’t even shake off Hummer, its dead in the water humungous SUV brand. With a merger, GM would seemingly close out Chrysler and Dodge, while retaining Jeep. This means that in the US alone GM would have Cadillac, Buick, Saturn, GMC, Saab, Hummer, Pontiac, Chevrolet, and Jeep to manage, producing unique models for each brand, with lots of overlap.

I can understand why GM would want Chrysler besides obtaining the coveted Jeep brand. In effect, GM would keep a foreign interloper from grabbing Chrysler and competing against GM on its home turf. Outside of the US and Canada, Chrysler is a virtual non-factor, but here in North America the #3 automaker does perform well with select products. Besides Jeep, Chrysler rules the minivan roost and the Dodge Ram pickup truck is a formidable competitor in a very competitive big truck market.

Does Cerberus See A Golden Calf?

But, the deal wouldn’t even be happening if Chrysler’s current owner, Cerberus Capital Management didn’t see a major amount of money to be gained with the current federal bail out. Supposedly, Cerberus wants to petition the feds to include car loans in the bail out plan, but even if that doesn’t happen the company — which owns 51% of GMAC — stands to gain plenty through government assistance with its investments in the slumping home mortgage industry.

Already, the three Detroit automakers will soon be the beneficiary of low-rate federally backed loans which will help the companies retool their plants and supposedly avoid catastrophic layoffs. Neither Ford, GM, or Chrysler has seen that money yet as the federal government works out oversight of the loans.

Massive Lay Offs, Plant Closings

The worst case scenario for GM-Chrysler seems to be the one the two parties are proposing: massive layoffs and the shutting down of quite a few plants across the US and Canada. With 66,000 employees, Chrysler could easily shed half of those jobs as GM seeks to consolidate. That could also mean GM shedding some of its own employees, with the potential of laying off more than 50,000 people, and closing quite a few plants. Would a Democrat dominated Congress and White House allow this?

Why Not A Partnership Instead?

Should no one want Chrysler except for GM (Renault seems interested), an alternative plan could have GM and Chrysler forging a business partnership along the lines of Renault and Nissan. Instead of merging operations, the two automakers collaborate on some projects and own a piece of each other. Cerberus could offer to purchase a slice of GM and GM, in exchange for selling GMAC to Cerberus, hold a piece of Chrysler.

The two companies could collaborate on engine and transmission technology, share a small car platform, and Chrysler could provide its minivan platform to GM. Some jobs would be lost, a few plants closed, but nothing on the order of the massive redistribution being proposed.

The Most Radical Proposal Of All

Finally, I wouldn’t be surprised if the federal government pressures all three automakers to merge, something a Democratic controlled government might propose. Like the failed intervention of the British government in their own industry in the 1970s, our politicians might be tempted to do likewise. A disastrous move, but one that I could see taking place.

Photo courtesy of Chrysler LLC