The rumored talks, as reported in The Detroit Free Press and several other papers, involve GM giving Cerberus its remaining 49 percent stake in GMAC in exchange for Chrysler.
Such a deal would allow GM to shed its troubled mortgage company in return for a significant boost in market share, as well as increased bargaining power with the UAW and suppliers.
GM might even be able to get some desperately needed cash, as many analysts believe the company's share of GMAC is worth more than Chrysler. Cerberus paid Daimler $7.2 billion for the automaker in 2007, but its value has declined since then. Cerberus already owns 51 percent of GMAC.
Of course, a combined GM and Chrysler would face many challenges. GM would likely have problems integrating Chrysler, Dodge and Jeep into its already muddled brand strategy. Furthermore, Chrysler has fallen behind its competitors in most segments, and thus would offer GM little in terms of product advancements (aside from minivans, which GM recently dropped in favor of large crossovers). GM would also gain more than 65,000 employees, although it would presumably eliminate much of Chrysler's management. In other words, it remains unclear how a troubled automaker like GM would benefit in the long term from swallowing an even more troubled company like Chrysler.
GM's board was not very receptive to idea during discussions with management, according to the Wall Street Journal.
We're interested in what you, the readers, think of this potential merger. Which products would you love to see (Hemi Camaro...) and which would you dread (Pontiac Town & Country...)?
Source: Detroit Free Press