Cryptic
10-30-2008, 09:25 PM
Consultant: GM merger would eliminate most Chrysler vehicles
Ford wants 'parity' if government gets involved
Bradford Wernle
Automotive News
October 30, 2008 - 2:50 pm ET
UPDATED: 10/30/08 4:00 p.m. EDT
DETROIT -- A merger between General Motors and Chrysler LLC would result in the closing of as many as half of Chrysler's factories and elimination of all but about seven core models, according to a report by consulting firm Grant Thornton LLP.
A deal also could result in a loss of 100,000 to 200,000 jobs at the two automakers, suppliers and other industry stakeholders, said Kimberly Rodriguez, principal of Grant Thornton's automotive practice.
Rodriguez said she believes negotiators could reach an agreement in principal as soon as Tuesday, Nov. 4, election day. Reuters reported yesterday that GM and Chrysler's owner, Cerberus Capital Management LP, have resolved major issues and the final form of any accord will depend on financing and U.S. government support.
"Chrysler as we know it will cease to exist very soon," she said at a briefing with reporters today in suburban Detroit. "There are few options available to either company."
Chrysler now has 14 factories, two of them already scheduled to close: Newark, Del.; St. Louis South.
Chrysler has also offered its Viper business for sale, along with the Conner Avenue plant in Detroit where the sports car is made. Grant Thornton believes an additional four plants could close. Among the plants on the cusp would include Sterling Heights (Chrysler Sebring, Dodge Avenger), Toledo North (Jeep Liberty, Dodge Nitro), St. Louis North (Dodge Ram) and Saltillo, Mexico (Dodge Ram heavy duty trucks).
The blended companies would command about one third of U.S. auto sales.
In a related development today, if GM and Chrysler get federal aid, Ford Motor Co. will expect some help, too. Ford executives are staying in touch with federal policy makers and "the powers that be" to make sure they understand the challenges Ford also faces, said Mark Fields, Ford's president of the Americas.
"We just want to make sure we continue that ongoing dialogue and make sure that, whatever happens, there's a degree of parity," Fields told reporters at a press event today.
Lesser of the evils
Rodriguez acknowledges the merger of GM and Chrysler was not "an optimal solution," but is still better than the alternatives, which would include one or both of the companies going out of business.
"Despite the significant number of families that will be impacted, the benefits of combining the two companies are both structural and strategic," Rodriguez said.
Consolidation of the dealer bodies of both companies would likely accelerate with a merger, according to the Grant Thornton study. The two companies have about 22,000 dealer franchises, more than half of those in the United States.
The remaining Chrysler dealers would have many fewer vehicles to sell. Grant Thornton estimates Chrysler now has 26 models, but only seven are core. Surviving Chrysler vehicles would likely be the Dodge Ram pickup; Chrysler and Dodge minivans; and several Jeep models, including the Wrangler and Grand Cherokee.
The merger, while unpalatable in many respects, would provide several benefits:
• GM's leadership in plug-in hybrid technology
• A stronger position in full-size pickups, displacing Ford as industry leader
• More liquidity, thanks to the cash on Chrysler's balance sheet
• Cost reduction by elimination of overlapping staffs, especially in sales, marketing and administration.
An expensive deal
Rodriguez says the industry consolidation that would follow a GM-Chrysler merger would be a very costly proposition, especially if the industry approaches it responsibly, as she expects it will.
The lost work to the supply base would put hundreds of companies at risk.
"It will actually cost the combined GM-Chrysler entity, as well as the other OEMs in the industry that will have to deal with suppliers who will no longer be viable," she said.
"The suppliers have been hit by the financing crisis and the raw materials crisis and volumes falling off. This will be a final blow to many suppliers and that will be costly to all the OEMS, but in a controlled fashion, it's something that the industry with access to financing should be able to weather."
Rodriguez says that up to 50,000 additional non-Chrysler jobs could be lost from the supply base if Chrysler was to close the plants Grant Thornton expects.
The timeframe could be years. Some vehicle platforms could go away, some plants could be closed as early as the holiday shutdown and other plants could take years to close, she said.
Still, the impact to the supply base is, according to Rodriguez, potentially one of the largest effects of a transaction of this type.
"For every one job you might lose at a direct plant, you can multiply that by 5 or 6 in the industry as a whole," she told reporters at a briefing.
Ford wants 'parity' if government gets involved
Bradford Wernle
Automotive News
October 30, 2008 - 2:50 pm ET
UPDATED: 10/30/08 4:00 p.m. EDT
DETROIT -- A merger between General Motors and Chrysler LLC would result in the closing of as many as half of Chrysler's factories and elimination of all but about seven core models, according to a report by consulting firm Grant Thornton LLP.
A deal also could result in a loss of 100,000 to 200,000 jobs at the two automakers, suppliers and other industry stakeholders, said Kimberly Rodriguez, principal of Grant Thornton's automotive practice.
Rodriguez said she believes negotiators could reach an agreement in principal as soon as Tuesday, Nov. 4, election day. Reuters reported yesterday that GM and Chrysler's owner, Cerberus Capital Management LP, have resolved major issues and the final form of any accord will depend on financing and U.S. government support.
"Chrysler as we know it will cease to exist very soon," she said at a briefing with reporters today in suburban Detroit. "There are few options available to either company."
Chrysler now has 14 factories, two of them already scheduled to close: Newark, Del.; St. Louis South.
Chrysler has also offered its Viper business for sale, along with the Conner Avenue plant in Detroit where the sports car is made. Grant Thornton believes an additional four plants could close. Among the plants on the cusp would include Sterling Heights (Chrysler Sebring, Dodge Avenger), Toledo North (Jeep Liberty, Dodge Nitro), St. Louis North (Dodge Ram) and Saltillo, Mexico (Dodge Ram heavy duty trucks).
The blended companies would command about one third of U.S. auto sales.
In a related development today, if GM and Chrysler get federal aid, Ford Motor Co. will expect some help, too. Ford executives are staying in touch with federal policy makers and "the powers that be" to make sure they understand the challenges Ford also faces, said Mark Fields, Ford's president of the Americas.
"We just want to make sure we continue that ongoing dialogue and make sure that, whatever happens, there's a degree of parity," Fields told reporters at a press event today.
Lesser of the evils
Rodriguez acknowledges the merger of GM and Chrysler was not "an optimal solution," but is still better than the alternatives, which would include one or both of the companies going out of business.
"Despite the significant number of families that will be impacted, the benefits of combining the two companies are both structural and strategic," Rodriguez said.
Consolidation of the dealer bodies of both companies would likely accelerate with a merger, according to the Grant Thornton study. The two companies have about 22,000 dealer franchises, more than half of those in the United States.
The remaining Chrysler dealers would have many fewer vehicles to sell. Grant Thornton estimates Chrysler now has 26 models, but only seven are core. Surviving Chrysler vehicles would likely be the Dodge Ram pickup; Chrysler and Dodge minivans; and several Jeep models, including the Wrangler and Grand Cherokee.
The merger, while unpalatable in many respects, would provide several benefits:
• GM's leadership in plug-in hybrid technology
• A stronger position in full-size pickups, displacing Ford as industry leader
• More liquidity, thanks to the cash on Chrysler's balance sheet
• Cost reduction by elimination of overlapping staffs, especially in sales, marketing and administration.
An expensive deal
Rodriguez says the industry consolidation that would follow a GM-Chrysler merger would be a very costly proposition, especially if the industry approaches it responsibly, as she expects it will.
The lost work to the supply base would put hundreds of companies at risk.
"It will actually cost the combined GM-Chrysler entity, as well as the other OEMs in the industry that will have to deal with suppliers who will no longer be viable," she said.
"The suppliers have been hit by the financing crisis and the raw materials crisis and volumes falling off. This will be a final blow to many suppliers and that will be costly to all the OEMS, but in a controlled fashion, it's something that the industry with access to financing should be able to weather."
Rodriguez says that up to 50,000 additional non-Chrysler jobs could be lost from the supply base if Chrysler was to close the plants Grant Thornton expects.
The timeframe could be years. Some vehicle platforms could go away, some plants could be closed as early as the holiday shutdown and other plants could take years to close, she said.
Still, the impact to the supply base is, according to Rodriguez, potentially one of the largest effects of a transaction of this type.
"For every one job you might lose at a direct plant, you can multiply that by 5 or 6 in the industry as a whole," she told reporters at a briefing.