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Chrysler, GM Merger Could Be Announced Before Election Day
http://blog.mlive.com/chronicle/2008/10/chrysler_gm_merger_could_be_an.html
by RICK HAGLUND, Chronicle Detroit Bureau
DETROIT — A merger of General Motors Corp. and Chrysler LLC could be announced before Election Day, according to a new analysis of the merger's impact by a national accounting and consulting firm.
Meanwhile, Gov. Jennifer Granholm and the governors of Delaware, Kentucky, New York, Ohio and South Dakota sent a letter to federal officials Thursday asking for immediate financial help for the auto industry, which the governors said faces "unimaginable challenges."
Additionally, state officials are holding a private meeting today with about a half-dozen local economic developers in southeast Michigan whose communities could be affected by a possible Chrysler merger, said spokeswoman Bridget Beckman for the Michigan Economic Development Corporation.
The meeting in Warren will discuss a state and local strategies in addressing a possible merger, she said.
All these developments point to an imminent deal for GM to swallow Chrysler, although the two are mum on the subject.
An analysis released Thursday by the Southfield office of Grant Thornton LLP said Chrysler has enough cash to operate for only a few more months and cannot remain an independent company.
"Chrysler as we know it will cease to exist very soon," said Kimberly Rodriguez, a principal in Grant Thornton's automotive practice.
GM reportedly is lobbying Washington for a $10 billion loan to help it acquire Chrysler from Cerberus Capital Management LP. Rodriguez said getting a deal announced before the election would eliminate the risk of support for a merger by a new president and Congress evaporating.
"I think there's a really good reason to get it done before Tuesday," Rodriguez told reporters in a conference call.
But even a merger is likely to result in the loss of as many as 40,000 Chrysler jobs, the shutdown of seven assembly plants and the elimination of thousands of dealerships, according to the Grant Thornton analysis.
Rodriguez said it's likely GM would trim Chrysler's 26 car and truck models to just seven. They would include the Jeep brand, the Dodge Ram pickup and Chrysler's minivans.
A merger also would likely result in the closing of hundreds of Chrysler suppliers and the loss of 50,000 supplier jobs, according to Grant Thornton's analysis.
But the loss of Chrysler and supplier jobs will be far worse if Chrysler fails, Rodriguez said.
In such a scenario, Chrysler would be unable to pay suppliers, who would also go out of business and possibly hamstring the entire U.S. auto industry.
That's because Chrysler's financially strapped suppliers also provide parts to many other foreign and domestic automakers that build vehicles in the United States.
"I cannot even discern that possibility," Rodriguez said.
Grant Thornton and other experts say an acquisition of Chrysler by GM is the best way to keep the two from going bankrupt. Both companies are losing money and burning through billions of dollars in cash every month.
GM would be able to cut billions in costs and eliminate a competitor by acquiring Chrysler, some say.
In their letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, the governors said the federal government must take emergency action to aid the crippled auto industry.
"While all sectors of the economy are experiencing difficult times, the automotive industry is particularly challenged," the letter said. "As a result, the financial well-being of other major industries and millions of American citizens are at risk."
E-mail Rick Haglund at [email protected]
http://blog.mlive.com/chronicle/2008/10/chrysler_gm_merger_could_be_an.html
