Last updated on Friday, November 7, 2008
General Motors and Chrysler are two of the most familiar names in American industry, not to mention American households. But now, the two companies are looking into the possibility of becoming one.
But is that a good idea or a bad idea?
Let's face it. Detroit is in a bad way.
The financial crisis is curbing the efforts of buyers not just to buy American cars, but cars in general. The recession isn't helping either. The Big 3 automakers, General Motors, Ford and Chrysler, were all in dire straits in the first place because, well, they made a bunch of lousy cars and a bunch of, frankly, decent trucks, which people can't afford to drive anymore because of gas prices.
Chrysler has been especially hard hit due to poor build quality, and to poor design direction from now-outgoing design director Trevor Creed. For some Chrysler-based names plates, which also include Dodge and Jeep, the biggest buyers have been fleet managers and rental car companies.
This has been the case for a good long while now, and back in the late 1990s, people thought the quote unquote "merger," rather buyout of the then Chrysler Corporation by Daimler-Benz would fix that. But bungling by Stuttgart managers like Dieter Zetsche found little to no synergy being developing in the two companies.
So after the DaimlerChrysler disaster was over, Chrysler found itself in a bigger disaster, being bought by venture capital management company Cerberus. Everyone in the automotive press, along with anyone watching the industry, knew that Cerberus wasn't interested in long-term ownership of Chrysler, and knew the bean counters at Cerberus would dump them off on another buyer as soon as they figured they could make a buck on it. Well, now, that prospective buyer is General Motors herself.
So what's the verdict? Bad Idea
If it wouldn't be so annoying, I would spend the remainder of this edition of Good Idea, Bad Idea just repeating "Bad Idea" as it's that horrible of an idea.
Why?
Simply enough, it will literally destroy the American economy...at least further. The Chrysler and Dodge nameplates will disappear, the only remnants of which being the Town & Country minivan and the Ram pickup, and Jeep will replace Hummer as GM's SUV and truck brand, except GM already has one of those in GMC. Half of Chrysler's manufacturing capacity will be shut down costing about 24,000 jobs, and that will have further impact on suppliers, like Columbus, Indiana based Cummins, which could see another 100,000 to 200,000 pink slips issued.
So, what to do? Cerberus needs to just issue a public stock offering in Chrysler to raise cash to weather the bad times, and reorganize internally. GM needs to just keep doing what it's doing. GM's on the right path, making cars like the Chevy Malibu and Volt, merging Saturn and Opel platforms, and combining Pontiac, Buick and GMC dealerships to eliminate nameplate redundancies.
Otherwise, a merger between GM and Chrysler could make Detroit, as a whole, redundant.
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