Tucson CitizenTucson Citizen

Why GM shouldn’t merge with Chrysler

If I were the U.S. Treasury Department, I’d offer GM executives $10 billion, on the condition that they walk away from Chrysler and never look back.

Or $15 billion, $20 billion – whatever it takes to ride out this economic storm without getting panicked into a desperate and ill-advised merger.

For politicians who talk about helping Main Street as well as Wall Street, the cost of low-interest loans to help automakers weather a recession is chicken feed compared with the $1 trillion-plus already approved for banks and financial firms.

The payoff is also easier to foresee and more immediate: protecting hundreds of thousands of jobs for blue- and white-collar workers at factories, dealerships and other businesses across the country.

I’d insist on other conditions beyond banning a GM-Chrysler merger. Any U.S.-based automaker would qualify for low-interest loans as long as management could convince me it has a feasible plan for the company to survive long-term. A plan that includes alternative-fuel vehicles and a thriving lineup of cars of all sizes. Cars designed and developed to compete with vehicles from anywhere on Earth. Great cars to end Detroit’s reliance on trucks.

GM has such a plan. Ford does, too. They’ve learned from the mistakes they made in the 1980s and ’90s. The recent introduction of successful vehicles such as the Chevrolet Malibu, Cadillac CTS, Ford Fusion, Escape and Edge and GMC Acadia prove it. Cut them checks.

Chrysler’s leaders, on the other hand, spent much of the nine years they were part of DaimlerChrysler approving vehicles that didn’t stand a chance in the market – the Sebring sedan and Jeep Compass, to name two of too many. New owners from Cerberus arrived a year ago and dropped even the pretense of a long-term strategy.

I’m sure Cerberus would happily cash a federal check, but nothing in its behavior suggests the money would secure Chrysler’s future.

Cerberus’ ownership of Chrysler is a strip-and-flip operation. Step one: Lay off people, cut investments, close plants and drop models to make Chrysler a small, easily digestible acquisition. Step two: Sell it to an automaker that will build something new from the ashes.

Chrysler possesses many valuable assets. It builds great minivans – so good that Volkswagen hired it to provide the new Routan. Nissan has stopped developing big pickups because it saw the new Dodge Ram and realized Chrysler does the job better and cheaper.

Chrysler also has a sales network that blankets North America, the renowned Jeep brand and the legendary Hemi V8 and 300 sedan. It’s a smart acquisition for a number of automakers.

But not GM. That combination could devastate both companies rather than save either of them. GM and Chrysler have too much overlap in vehicles, sales outlets, manufacturing and engineering. A merger would assure widespread closures of plants and dealerships, and thousands of job losses from the factory floor and engineering office to the reception desk and service bay at your local dealership.

I don’t see the feds underwriting that, but an aid package that required a merged company to keep extra factories, trucks, brands and dealerships – as has been suggested – would set GM’s own reorganization back years and threaten the company’s future.

It’s a matter of time before Cerberus sells Chrysler. The government may have a role in facilitating that deal and protecting workers, but not at the cost of overburdening another struggling U.S. company.

Citizen Online Archive, 2006-2009

This archive contains all the stories that appeared on the Tucson Citizen's website from mid-2006 to June 1, 2009.

In 2010, a power surge fried a server that contained all of videos linked to dozens of stories in this archive. Also, a server that contained all of the databases for dozens of stories was accidentally erased, so all of those links are broken as well. However, all of the text and photos that accompanied some stories have been preserved.

For all of the stories that were archived by the Tucson Citizen newspaper's library in a digital archive between 1993 and 2009, go to Morgue Part 2

Search site | Terms of service