Morici, in a commentary e-mailed to reporters Monday, argues that Chrysler's positives are not worth the considerable baggage that an acquisition would require. Specifically, Chrysler's Jeep and minivans (pictured above) would not justify GM paying out heavy severances to workers it laid off to streamline operations and shutter Chrysler and Dodge's operations.
"Simply, Chrysler has two good franchises that would complement GM's product mix but those are hostage to an otherwise uncompetitive corporate structure" Morici wrote. "GM can't fix those problems easily."
Morici's commentary outlines the dilemma facing GM as it considers a takeover of Chrysler, but don't expect Chrysler owner Cerberus Capital Management LP to follow his advice. General Motors' interest seems centered on acquiring Cerberus' $11 billion cash stockpile, hopeful to raise cash in any transaction by taking money-losing Chrysler off of Cerberus' books. The company would probably agree with Morici's analysis of the attractiveness (and unattractiveness) of Chrysler's assets, and would have to do a lot of cutting if it goes through with a deal.
But while a bankruptcy filing, which would allow Chrysler to shed some of its debt and terminate its contract with the United Auto Workers, would certainly make what is left of the automaker a more tempting morsel, it would also likely force Cerberus to write off its 81% stake in the company. Using the courts to cut deeply could also anger Chrysler, Dodge and Jeep dealers and worry warranty holders, making it more difficult for the automaker or whoever buys its assets to sell cars in the future.
It is also unclear whether GM or any other automaker would be willing to risk the wrath of the UAW by purchasing assets from Chrysler after the union was defanged by a bankruptcy court judge.
To be sure Chrysler is in a world of trouble, and if Cerberus is unable to strike a deal with GM or another automaker, bankruptcy will have to be considered. Despite the powers a Chapter 11 filing could offer, bankruptcy still appears to be the least desirable of all of the difficult options available to Cerberus. - Lou Whiteman
See TheDeal.com story explaining GM's interest in Chrysler
See Dealwatch: Autos
Comments
With many in the industry remaining skeptical about the prospects for success of a General Motors Corp. acquisition of Chrysler LLC, business professor and longtime auto industry critic Peter Morici has an alternative suggestion for Chrysler's owners: Declare bankruptcy.
All about this: have GM, Chrysler and Ford all declare bankrupcy and form one company. Then the UAW would no longer have power. By shedding the UAW contracts the auto industry would be more competitive in the world market.