May 242024

Other analysts say that the anticipated acquisition by General Motors Corp. of the Chrysler Group is less likely to happen. But others contend otherwise.

News about the merger between GM and Chrysler swarms in the business industry. This is triggered by the announcement made by DaimlerChrysler AG that it is considering all options for the betterment of the company. The said revelation has cheered its German stockholders and other companies interested in Chrysler. The heat about the potential sale is getting hotter and hotter that auto industry’s Vibrant cold air intake or other car cooling system is needed to calm down the already bubbling adrenaline.

Some of the analysts in the industry questioned why GM would spend some of its $26.4 billion in cash raised by selling profitable assets such as GMAC to purchase an ailing vehicle manufacturer. When asked about the reports, the companies declined to give comments.

“Anything’s possible, but this one seems unlikely,” said John Casesa, a longtime auto analyst and managing partner of New York-based Casesa Strategic Advisors LLC. “It would increase exponentially the challenges GM faces in turning around the company. These two companies have an immense amount of overlap in people, plants, dealers and products, and there’ll be very considerable cost in working through all that.”

On Friday, shares of DaimlerChrysler increased by $3.08, or 4.4 percent to closed at $73.33 on the New York Stock Exchange. It has also amplified by 13.8 percent since DaimlerChrysler Chairman Dieter Zetsche first said all options were on the table concerning Chrysler’s future. German shareholders own a substantial DaimlerChrysler’s shares. Also, some advocates have argued for years that overturning would restore Daimler’s stable profits.

The deals are just within reach. But the query is – is it worth it? Ron Tadross, Banc of America analyst said GM could spend $5 billion for Chrysler, accept short-term losses of $750 million a year, and still make the deal work assuming synergies of $2 billion a year. However, he noted that a combined GM-Chrysler would be a hodgepodge of 15 brands and 10,000 dealers, compared to Toyota Motor Corp.’s three brands and 1,500 dealers. While GM would get access to Chrysler’s minivans and rear-wheel-drive sedans, the companies’ lineups would overlap in nearly every other segment.

“In addition to integration risk, we think the new company’s 30% U.S. retail share could become more vulnerable over time,” Tadross said, adding that “rebadging of vehicles is increasingly transparent to the consumer.”

David Cole, the chairman of the Center for Automotive Research in Ann Arbor, said UAW President Ron Gettelfinger, a member of DaimlerChrysler’s supervisory board, may be pushing discussions with GM. “I don’t think Chrysler is going to stay in DaimlerChrysler,” Cole said. “If I were Ron, I would like to have, probably, an American company be the buyer versus a Chinese company or a French company or a private-equity group.”

Jonathan Steinmetz, an analyst at Morgan Stanley inquired whether the rumors were “at least in part posturing” by DaimlerChrysler for the UAW. “It is unclear why the UAW would be willing to accept a GM-Chrysler consolidation, which would reduce their bargaining position and possibly lead to significant job cuts,” Steinmetz said.

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