Monday, February 19, 2007

I've Got A BAD Feeling About This.

Rumors are beginning to swirl and people are talking. If it is true it means more economic pain for Michigan, at least in the short term.

GM might buy out Chrysler from DMX.

The first, poorly thought out, thought might be that it would be good to have Chrysler being an American company again, but then there all the little (and not so little) problems that would come with it.

First off, the merger would probably (more like certainly) result in more job losses as redundant jobs and models are eliminated. Both companies need to make and sell better products that meet customer expectation, not simply eliminate competition.

Stockholders would take a hit as the combined value of the two companies is probably greater as seperate companies than they would be as one company. The value of Chrysler stock has gone up but this will not put it where it should be.

From a manufacturing standpoint it makes no sense for a company that is downsizing to suddenly increase everything that it had been cutting. Yes they will sell more units but will a GM-Chrysler combo sell more units than they would seperately? I don't think so.

The state treasurer is understandably concerned. We really do not need to lose more jobs.

My question is How can GM afford it? They have major losses and are drowning in red ink. This would require a considerable outlay of capital and I wonder how GM is going to come up with it.

In the end I must remember what is written in large friendly letters on the cover of The Hitchhiker's Guide to the Galaxy.


I'm not in a panic mode because, for starters, I'm not sure it's going to happen.

We'll just have to see.


Blogger Crazy Politico said...

I definitely don't see it as a great idea. Maybe it would be if GM gets a couple dozen Damlier suspension guys in the deal so their cars quit handling like jellomobiles. Then maybe it would be okay.

I think the auto industry is starting to look to the legacy airlines for clues to how to stay solvent. By merging, eliminating duplicate models, and consolidating resources it might make for a stronger company. The flip side it is may make for an even larger behemouth that can't deal with the changing industry.

6:15 AM  
Blogger The Conservative UAW Guy said...

It could get interesting.

5:02 PM  
Blogger Tom said...

It's far from interesting - it's downright scary.

The bottom line is if this rumor is actually true, lots of people at both GM and DCx will lose their jobs, and that's not good for either the people or Michigan.

And I think that the auto industry will suffer in the long run - the airline industry is only surviving, not thriving, through their multiple rounds of consolodation.

6:15 PM  
Blogger Tom said...

And by the way, I have my towel ready...

6:16 PM  
Blogger ABFreedom said...

When I first heard this I went Huh? as well. I thought GM/Chrysler/Ford were all having financial trouble already. Like you say, if it happens, it's probably a long ways out, but if it does, it will be messy.

8:52 PM  
Blogger Gayle said...

I must admit I don't understand all the possible ramifications from this, Shoprat, other than the fact that many people will lose their jobs which is never a good thing. So all I can do is to pray that it won't happen.

6:53 PM  
Blogger BB-Idaho said...

Wonder about those rumors the Chinese are interested, they have a ton of cash, mostly ours....

9:50 PM  

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