GM & Chrysler

As merger talks occur (but no comment from the companies of course!) I thought I'd let everyone know what this deal is really about.

NPR was talking with an editor at Edmunds and she said it was pretty much so GM can get Chrysler's cash reserves now, and have more leverage with the Feds to get money from them later. This is a high risk/reward situation. If it works GM gets lots of Fed dollars and stays afloat hemorrhaging money for a few more years. If it doesn't....well, I guess I don't need to worry about coming into work.

Talking to our Chrysler rep the other day he had a good analogy for the situation. Here's how it had been explained to him.

"You own a house and are totally upside down in a bad mortgage. Your neighbor has a bigger house, but is in the same situation. Your neighbor goes to the bank to get a mortgage to buy your house, and then proceeds to burn it down for insurance purposes."

That is, in a bit of an oversimplified nutshell, what GM wants to do. GM wants Chrysler's 10-11 billion in cash reserves. But GM also believes that if they acquire Chrysler (which would involve completely gutting Chrysler and probably all but dissolving the company) they would be more likely to get more loans from the Feds.

Talk about a risky move!

The fortunate thing is that GM's investors may not go for the deal. Cerburus is just looking to get their money so I don't think they care what happens to Chrysler if they get their money back.

Chrysler needs to hook up with a company that can benefit them now and for the future. Teaming up with Nissan or Hyundai would seem to benefit Chrysler and both of their companies by giving them a larger dealer base for pretty much free. Even Renault would be a good thing it seems for the same reason.

I just really hope the GM/Chrysler deal never happens because it is merely a ploy to try and weasel money from the government.