GM (GM) And Chrysler: Why Die Alone?

Rumors have surfaced again that Chrysler and GM (GM) may restart talks about a merger. For some time analysts and executives at the two companies have believed that a marriage would save $5 billion or so a year and allow the new entity to cut 40,000 or more people.

While putting that many people out of work may be horrible, it beats having most of the employees at the two firms fired due to bankruptcies.

According to the FT, "Chrysler hopes to revive merger talks with General Motors once a government bail-out package for Detroit’s carmakers is agreed allowing the two companies to address their immediate liquidity problems."

That would put the events in the wrong order, especially since the Congress does not seem inclined to invest money in the car industry. It is not a sure thing that the new administration can come up with the capital although analysts are betting in that direction.

Arguing that bailing out two companies so they might become one seems like a losing proposition. Arguing that a combined and more efficient firm would be much more likely to be profitable and would only need modest capital to bridge it through the merger should be much easier to sell.

Detroit does not seem to be terribly skilled at selling itself, so why should this be an exception?

Douglas A. McIntyre