Topic: A GM-Ford Marriage

[ArticSteve]

How desperate are things in Detroit? At a recent management meeting, a senior General Motors (GM) executive floated the idea of approaching Ford Motor (F) about a merger, BusinessWeek has learned.

The idea was shot down quickly, says someone familiar with the discussions. But it's telling that anyone in the C-suite even brought it up. Ford and GM are burning cash and weighing their options if auto sales continue to free-fall. "I don't think a merger is likely," says David E. Cole, chairman of the Center for Automotive Research. "But you'll see a lot of options considered if they think bigger problems will come [along]."

A GM-Ford marriage has some merit. Merging the massive overhead of each company would save a combined entity billions. Their total cash hoard of nearly $50 billion could help them survive what most analysts expect to be a year or two of weak sales.

But when the idea came up, most in the room waved it away, saying a hookup would be a huge distraction at a time management needs to focus on a turnaround. Plus, a deal would double many problems, including an excess of plants that build gas guzzlers, brands that need repair, and losses in North America.

Putting such a deal together also would be incredibly complex. There are shareholders on both sides—including the Ford family, which has a major stake—to be considered. Billionaire Kirk Kerkorian is now Ford's largest independent owner. The union would want a say in what happens to all those factory workers. And then, what would you call the company? General Ford Motors just doesn't sing.

Eventually there will be only one American auto company.  Chrysler gone in 2 years and Ford in 4.   

[initial_D]

Eventually there will be only one American auto company.  Chrysler gone in 2 years and Ford in 4.  

GM dominates? Then Toyota should have some real competition.

[dr_spock]

Or Toyota buys Ford and GM minus the unions. 

[initial_D]

Or Toyota buys Ford and GM minus the unions. 

They will have to bankrupted first to clear off the liabilities.

[PJungnitsch]

I think Chrysler in its present form will be gone within a year, possibly by the end of the summer if Cerberus gets fed up with losing money. That said, struggling companies can carry on surprisingly successfully under different hats, in the farm equipment industry AGCO is a story like that with Allis, White, Massey, etc.

http://en.wikipedia.org/wiki/AGCO

Of Ford and GM, I think Ford has the best chance, both are burning through cash reserves by the barrelfull but Ford actually seems to have a turnaround plan in place. GM seems to be reluctant to get rid of (or even shake up) the highly paid executives that piloted them into this black hole, and they are running out of parts of the company to sell.

[Sir Osis of Liver]

Artic has been trying to dance on the graves of the Big 3 for years. Inconveniently enough, they just keep on keepin' on.

[mwqa]

There doesn't seem to be much faith in the longterm viability of the domestics.

Even my brother, who gets an employee discount when buying cars from GM and Chrysler, only had enough faith to get into a 2 year lease on a Dodge Journey. ("I don't trust Dodge.")

Pretty sad and I don't know how they can compete with the likes of Honda (near the top of the heap) or Hyundia (working hard to get there). 

 

[safristi]

I can't afford a carriage never mind anuffer marriage,,,,,Now if a GTO shagged a ZR1 i could claim PATERNITY Saf"Y"chromisity...

[ArticSteve]

GM seems to be reluctant to get rid of (or even shake up) the highly paid executives that piloted them into this black hole,

Die hard Republicans to a man .... obviously.  Since 2000 they have embraced the Bush/Republican way of theft management and just like the USA their respective companies have followed in lock step.

[Thinking Out Loud]

Image the Air Canada / Canadian Airlines merger insanity multiplied 1,000 times.

I hear Robert Milton will be looking for work soon.  Certainly has the experience in union 'negotiations', product rationalization, and spinning off value units if Air Canada is any indication...

[barrie1]

Strange if GM is doing so bad why did they sell thousands more then everyone else in June alone. GM is a lot bigger then most folks realize with what they actually do own as well. They are a congomerate of thousands of different Corporations with each worh many millions of dollars in their own right. 

[toolatecrew]

Strange if GM is doing so bad why did they sell thousands more then everyone else in June alone. GM is a lot bigger then most folks realize with what they actually do own as well. They are a congomerate of thousands of different Corporations with each worh many millions of dollars in their own right. 

Why is GM doing so poorly when they sold "so many" vehicles?

Units sold X (Selling price- incentives (cashback 0% interest rates) -COST)= Profit

They have the unit sold thing going pretty well is the second part of the equation that GM seems to have a problem with either their costs ar too high or their selling price too low becuase its the only way they can generate the sales is with incentives and low selling prices.

[Mitlov]

Of Ford and GM, I think Ford has the best chance, both are burning through cash reserves by the barrelfull but Ford actually seems to have a turnaround plan in place.

GM does have a turnaround plan in place.  It's called making desirable cars.  Astra, Malibu, G8, Outlook, CTS...for just about any popular segment right now, GM has a new, desirable vehicle.  It'll take a while for the market to respond, but GM's doing a really good job of giving people cars they want.

Ford's done a better job at improving CR ratings and shaking up their executives, but I don't think they've done as good of a job of getting highly-desirable vehicles onto the market.

[ArticSteve]

Astra, Malibu, G8, Outlook, CTS...

It's going to take much more than those to turn GM around.  When, not if, gas hits 5 bucks plus in the USA like it is here, GM will implode.

For example, currently you cannot find an unclaimed Camry Hybrid in Canada.

[Mitlov]

Astra, Malibu, G8, Outlook, CTS...

It's going to take much more than those to turn GM around.  When, not if, gas hits 5 bucks plus in the USA like it is here, GM will implode.

For example, currently you cannot find an unclaimed Camry Hybrid in Canada.

...and yet, hybrids are still the exception, not the rule, in Canada.  Same in Europe, where gas is selling for ten US dollars per US gallon, yet hybrids are scarce.  I don't deny that Toyota makes some great hybrids, but not everyone wants a hybrid, even when gas prices are high.

The Astra (1.8L, 5MT) makes 24 mpg city (US gallons, per EPA rating), 32 mpg highway.  The Matrix (1.8L, 5MT) makes 26 mpg city, 33 mpg highway.  Slight advantage to the Toyota.  But if my Jetta caught fire and I was shopping for a new compact, the Astra would rank much higher on my list than the Matrix, because the Teutonic driving dynamics and style vastly outweigh those 1-2 mpg for me.  That's what I mean by GM's turn-around plan being desirable vehicles.  I'm now in a position where I'd rather have a Saturn than a Toyota, full stop, instead of just looking at the Saturn if I had to save money.  That's a remarkably different strategy than we saw 5-10 years ago.

[Sir Osis of Liver]

...GM had $24 billion in cash and marketable securities and access to about $7 billion in undrawn U.S. loans on March 31, at least $6 billion more than it initially figured it would need for a U.S. decline, Chief Financial Officer Ray Young said on May 13...

GM's June decline (18%) was narrower than the 28 percent for Ford Motor Co. and 21 percent for Toyota Motor Corp.

http://www.bloomberg.com/apps/news?pid=20601103&sid=a0yMZboVwnnE&refer=us

[tpl]

Astra, Malibu, G8, Outlook, CTS...

It's going to take much more than those to turn GM around.  When, not if, gas hits 5 bucks plus in the USA like it is here, GM will implode.

For example, currently you cannot find an unclaimed Camry Hybrid in Canada.

...and yet, hybrids are still the exception, not the rule, in Canada.  Same in Europe, where gas is selling for ten US dollars per US gallon, yet hybrids are scarce.  I don't deny that Toyota makes some great hybrids, but not everyone wants a hybrid, even when gas prices are high.

...

In euland with  many many 50mpg+ vehicles to choose from  with nice simple diesel engines why would anyone but a fanatic buy a complicated expensive hybrid.  I imagine that if there was a Camry diesel and a Corolla diesel sold in NA with  respectively  55 mpg and 65 mpg highway ( thats Imperial mpg Mitlov) that the hybrid sales would go down a lot.

[ArticSteve]

Astra, Malibu, G8, Outlook, CTS...

It's going to take much more than those to turn GM around.  When, not if, gas hits 5 bucks plus in the USA like it is here, GM will implode.

For example, currently you cannot find an unclaimed Camry Hybrid in Canada.

...and yet, hybrids are still the exception, not the rule, in Canada.  Same in Europe, where gas is selling for ten US dollars per US gallon, yet hybrids are scarce.  I don't deny that Toyota makes some great hybrids, but not everyone wants a hybrid, even when gas prices are high.

The Astra (1.8L, 5MT) makes 24 mpg city (US gallons, per EPA rating), 32 mpg highway.  The Matrix (1.8L, 5MT) makes 26 mpg city, 33 mpg highway.  Slight advantage to the Toyota.  But if my Jetta caught fire and I was shopping for a new compact, the Astra would rank much higher on my list than the Matrix, because the Teutonic driving dynamics and style vastly outweigh those 1-2 mpg for me.  That's what I mean by GM's turn-around plan being desirable vehicles.  I'm now in a position where I'd rather have a Saturn than a Toyota, full stop, instead of just looking at the Saturn if I had to save money.  That's a remarkably different strategy than we saw 5-10 years ago.

...and yet, hybrids are still the exception, not the rule, in Canada.

Canada has only had $5.30 US gallon gas for a month or so.  Back, in the good old days when gas was $4.00 US a gallon ppl were, upset, but not freaked out.  Less upset than ppl in the USA are now because we Canadians have been conditioned to getting scr*wed.

When Americans start paying $5.30 a gallon things won't be pleasant.  Personal body armour sales will soar.  

Same in Europe, where gas is selling for ten US dollars per US gallon, yet hybrids are scarce.

They have access to multi lines of diesel that simply don't exist here.

I have not seen an Astra on the road.  Only the sales numbers will confirm.

[ArticSteve]

...GM had $24 billion in cash and marketable securities and access to about $7 billion in undrawn U.S. loans on March 31, at least $6 billion more than it initially figured it would need for a U.S. decline, Chief Financial Officer Ray Young said on May 13...

GM's June decline (18%) was narrower than the 28 percent for Ford Motor Co. and 21 percent for Toyota Motor Corp.

http://www.bloomberg.com/apps/news?pid=20601103&sid=a0yMZboVwnnE&refer=us

I think you will find that those numbers will quickly change and be more similar to the Canadian numbers as gas prices work their way thru the US economy.

June auto sales: GM down, Chrysler ekes out gain, Toyota hits record

http://www.cbc.ca/money/story/2008/07/02/june-autos.html?ref=rss

[Sir Osis of Liver]

If "ifs" and "buts" were sugar and nuts ,we'd all have a merry Christmas.


Toyota's "record" should be put into perspective. Barely beat out rising Chrysler.

GM sales 32,355
Toyota & Lexus 22,428
Chrysler 22,194
Ford 21,959
Honda & Acura 16,518