J.P.

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Sources: GM in talks about buying Chrysler group

Jamie LaReau, Jason Stein and Bradford Wernle | | Automotive News / February 16, 2007 - 9:26 am




General Motors is in negotiations to buy the struggling Chrysler group in its entirety, say sources in Germany and the United States.

High-level talks are taking place between DaimlerChrysler AG and GM executives.

Although the two companies have discussed cooperation on a large SUV, say sources at both companies, the potential deal would go beyond limited product development alliances.

Talk of an alliance was first reported last week in Germany's Manager-Magazin.

GM spokesman Tony Cervone declined to comment on the speculation, saying, "We have always said that conversations (between GM and many other parties) have happened all the time, and many times they don't come to fruition."

A Chrysler spokesperson declined to comment. Other sources have reacted skeptically.

Asked about the possible deal, Klaus Franz, GM's top union official in Europe, said acquiring Chrysler would be a "disaster" for the automaker. Franz is vice chairman of the supervisory board at GM Europe's Opel division, based in Germany.

"This is only a step to remain the number-one automaker. The problem is that Chrysler is in the same situation as GM. They don't have the right product portfolio," Franz told Automotive News Europe.

"This would be comparable to GM's alliance with Fiat. And GM lost a lot of money with that decision. I hope GM learned its lesson."

Roman Mathyssek, an analyst for Global Insight in London, also is skeptical of a purchase: "At the end of the day, if they were really to do that, that would not be a cheap option for DaimlerChrysler at the moment. It would be a lot more effective for the DaimlerChrysler group to look at how they can continue their cooperation."

Last week, uncertainty over Chrysler's future increased as DaimlerChrysler CEO Dieter Zetsche said the company was open to all options for the Chrysler group, including a sale.

"All options are on the table," Zetsche said.

Chrysler unveiled a restructuring plan as it posted a $1.4 billion (1.1 billion euro) loss for 2006. That plan calls for cutting 13,000 jobs in North America by 2009.

According to media reports, DaimlerChrysler retained JPMorgan Chase & Co. to consider options for the Chrysler group.

DaimlerChrysler revealed its latest restructuring plan for Chrysler almost six years to the day after its first attempt at shoring up profits. Zetsche ran Chrysler until taking the top spot in Stuttgart last year.

Although growing ranks of shareholders would like to see Chrysler go, selling it is easier said than done. In Cologne, Germany, Bank Sal. Oppenheim analyst Michael Raab estimates it would cost $34 billion to separate the two businesses.

Analysts say a real stumbling block is the roughly $23.6 billion in unfunded pensions and health care liabilities for retirees that any buyer would want financed in full.

GSteg

iTrader: (15)

the irony...

plex

iTrader: (11)

LMAO..........I know right

mavericck

Good, Mercedes-Benz should have dumped that lame, retarted, and dying company long ago.

Lexmex

Wonder what kind of terms, price is being thrown around.

IS_Mine

+1

I think Bentley er VW (since they own Bentley...haha) should buy them. I mean.. they already got the 300. The sincerest form of flattery is being a copy car.. I mean cat. :P

Mr Johnson

This alliance just doesn't seem to make any sense to me at all. What is the point? Drive up capacity? Incur more health care costs and overhead? There are more areas they compete directly in than not.

I just don't get it.

GSteg

iTrader: (15)

They should build as many cars as the consumer demand, not build a bunch of cars and see how much they can sell. That'll save them some money. Cut production on cars that no one wants and stop creating new models one after another.

There are only a few american cars/truck that I would actually like to have.

xioix

It was the Chrysler Group that saved MB two years ago with the hugely successfully 300

9520G

How is that? Can you explain in more detail.

-J-P-L-

The only way this could work is:

The 2 merge and every division gets axed with the exception of

- Chevrolet
- Cadillac
- Dodge
- Jeep

With each division having a focused product line

Chevrolet = core lineup
Dodge = sporty/aggressive lineup
Cadillac = luxury line
Jeep = Rugged SUV/offroad brand

This would be the best way to compete with Toyota. Toyota is almost as big as GM with only 3 divisions. GM has always been cluttered with divisions all sharing the same basic models.

Focus is the key.

xioix

It was the Chrysler Group making a profit a couple years ago when MB was losing it

LexFather

Actually Mercedes was losing hundreds of millions and sucked up Chryslers money with their new product and now Chrysler is struggling and they want to sell it off. DCX stock is at a 7 year high.

This makes no sense and IMO a big rumor. Both companies would only merge to say they ARE BIGGEST. There is no other reason. Both are limited overseas, both have huge pensions both have product overlap.

Makes no sense. I do find DCX to have a good product its just their old baggage that is killing them. Mercedes is one recall away from being back in the dumps.

The big Benz shareholders just don't want to have anything to do with Chrysler. They just do not and NEVER did and will push and shove until someone breaks.

GreyHound

iTrader: (1)

I hope you are correct 1Sicklex, only a rumor that is. You are right, Chrysler did save mercedes. Mercedes has obviously become fair weather friends. Ole dr. 'Z' feel flat on his butt in those lame commercials, and they didn't fire him(should have). I hated the mustache. All your points are correct as to why the merger wouldn't work. Just what everyone would need more mediocre GM front wheel drive cars that look the same.

<<"Mercedes is one recall away from being back in the dumps.">>>
That is so true!!

What bothers me is I have always liked my Dodge Ram & my Jeep wrangler. They are somewhat distinctive, very reliable, easy to work on/modify. My Dodge Ram pulls my enclosed motorcycle trailer just fine. I cringe at the fact of Mopar being owned by GM.
Its bad enough that Mercedes watered down Jeep & Dodge, where we don't have solid front axels, (unless you upgrade to 2500 truck and only the Wrangler now), and now the first non Trail Rated Jeep, 'Compass'.

I would rather get out and push my Dodge than drive a chevrolet or
GMC(got mechanic coming).

Keeping my fingers crossed no Deal with GM. Would be hard for Chrysler to go back independent. Maybe Mitsubishi would like to hook up again with Chrysler? They need some help too?

LexFather

Great post.