This is getting weirder by the moment. Now reports out of London suggest DaimlerChrysler is looking at taking a minority stake in GM as a means of off-loading money-losing Chrysler. The deal would work something like this: GM takes over Chrysler and in return DaimlerChrysler buys GM stock. Basically, DaimlerChrysler would give GM the money to buy Chrysler.
The way the analysts play it, GM gets Chrysler without spending cash, and DaimlerChrysler ends up owning a slice of a GM/Chrysler combine. Now, I'm no finance guy, but I'm struggling to see exactly why this would be a good deal for GM.
In an earlier blog, I maintained there was simply no upside in Chrysler for GM. That's still the case.
Most of Chrysler's product lineup competes directly with GM models and Chrysler brands are far weaker globally. There could be some savings in purchasing generic parts, but proper platform sharing scenarios would take at least a decade to put into place. And then there are the issues of over-capacity and legacy costs: Both GM and Chrysler need fewer factories in the U.S., and both are paying a fortune in health care costs and other benefits that makes them uncompetitive with other automakers. Rolling Chrysler into GM doesn't solve these problems. It only makes them bigger.
Functionally, Chrysler is a basket case, for a bunch of reasons. Through most of 2006, its senior management team pursued a disastrous policy of keeping the factories churning out vehicles that weren't selling, and stockpiling them on lots before forcing them on reluctant dealers with deep discounts that destroyed their resale value. The "sales bank" idea didn't work in the 1960s. Forty years later, Chrysler's bosses have proven it still doesn't work.
The design leadership Chrysler assumed in the 80s and 90s has been lost to GM and Ford. Exhibit A: The new Sebring, a lumpen mish-mash of over-wrought Crossfire cues. Then there's the new Dodge Avenger, Jeep Compass and Commander, the boxy new minivans - none of these vehicles has the style, grace and flair we came to expect under Tom Gale.
A couple of commentators suggest the cost, aggravation and distraction of GM taking over Chrysler would be worth it to get hold of Jeep and the minivan business. I just don't see it.
Jeep is still a fabulous brand, despite DaimlerChrysler's best efforts with vehicles like the soft-road Compass (not just bad to look at and cheaply finished, but so off-brand it would devalue the Jeep name if enough folks actually bought one) and the Commander (an ugly box that singularly fails to do the one job it was allegedly designed to do - have useful third row seating). But if GM seriously thought there was a lot of money to be made in building trail-rated SUVs, it could make Hummer work a whole lot better for a lot less money.
Some goes for the minivans. Sure, it's a sizeable market segment. But Chrysler's leadership position - held out as a juicy plum for GM to pick - is now due more to market inertia than any real product innovation. Maintaining that leadership against automakers like Toyota and Hyundai is going to require ever increasing levels of investment over the coming years.
Minivans are increasingly becoming commodity vehicles; you won't be able to charge a fat premium for them much longer, which favors the low cost Asian producers. What's more, the generation of kids that grew up riding around in minivans is less likely to want to drive their mom's car when they grow it. Yes, the minivan could go the way of the station wagon. This is precisely the wrong time for GM to jump back into the minivan business.
After years of mis-steps and wrong-headed management, GM is now starting to coalesce into a focused automaker with effectively leveraged global resources. Chrysler's problems are all short-term problems, and a distraction GM management just doesn't need. GM needs to be thinking about - and spending money on - long term stuff like hybrids, diesels, weight reduction, CO2 emissions. Doing that, rather than taking on the Chrysler mess, it what will make GM a stronger company in 20 years' time.