The Chrysler Guessing Game
Ever since the news broke a few days ago that DaimlerChrysler would consider cutting Chrysler loose, the speculation has raged regarding just where Chrysler would end up if DaimlerChrysler decided to part ways with its American mass-market subsidiary.
Many industry analysts believe that the best (and by far the easiest in terms of neotiations) thing for the parent company to do is simply to spin it off as opposed to trying to sell it to another manufacturer. This scenario would have an investor group buying Chrysler, perhaps taking it private for a few years so it could regroup without a lot shareholder pressure, and then making it a public corporation again in order to reap the rewards of their restructuring efforts. But this would take awhile and be quite a distraction for Daimler.
The quickest way for DaimlerChrysler to shed Chrysler would be to sell the whole company to another automaker, but these negotiations would be very tough and might exact a higher volume of concessions on DaimlerChrysler than they wish to accept. Chrysler has a tremendous amount of outstanding liabilities around union and healthcare commitments. The again, Daimler may want Chrysler to go away as soon as possible, and therefore would be willing to take it on the chin vis-à-vis sale conditions in order to make a deal with another automaker possible.
The potential buyers? Everyone from Nissan-Renault to the upstart Chinese manufacturers to PSA/Peugeot-Citroen, and as of this morning (surprisingly), General Motors.
Nissan-Renault tried to cajole GM into a merger last year, but was unsuccessful, and one would have to assume they’re still interested in a North American partner. PSA/Peugeot-Citroen could use the volume and the North American base, but has shown no interest so far. That brings us to the Chinese.
If Chrysler is offered up for sale, I would not be surprised if one or more of the Chinese auto companies (Nanjing, Geely, SAIC, etc.) are fiercely involved in the bidding. The allure of being able to buy their way into the U.S. market (and an established dealer network), as well as getting technology and design on the cheap through purchase, AND, getting a couple of recognized brands in the bargain would seem to be an very attractive proposition for those companies. Frankly, I don’t see how some of them could resist such a scenario. For any Chinese auto maker – the price would be very low, they have a lot of cash on hand, and the purchase would dovetail very nicely with their long-term strategies.
General Motors buying Chrysler is a more perplexing situation. GM is just coming out their own near-death experience and their past and current problems are the same ones Chrysler has. Do they really want more problems just like the ones they have? And if so, what about the obviously overlapping product? What happens there? If the new entity starts cutting brands and models, then lots of jobs go away as well. Is GM prepared to weather the rough seas of public opinion in that regard? Or do they plan to keep the parts of Chrysler they want and broker the rest out to any car manufacturer that might be a buyer? Finally, if one of the reasons (stated or unstated) for purchasing Chrysler is simply to maintain their global No. 1 status over Toyota, then that itself should provoke some intense self-analysis at GM – are bragging rights any kind of reason for taking on Chrysler? To me, the scenario of General Motors buying Chrysler doesn’t make sense. And yet, German newspapers and television are reporting that GM is in active discussions to acquire Chrysler as soon as possible.
Now, on the other hand, if DaimlerChrysler decided to sell Chrysler and sold it off piecemeal, that is, put Dodge up for sale separately, Jeep up for sale separately, etc., then all bets are off in terms of potential buyers. There might be one specific part of Chrysler that a lot of companies want, including in that group GM, Toyota, Nissan-Renault, etc. As well as, of course, the Chinese companies previously mentioned.
Just as a sidebar, one interesting thing to think about is that any buyer of Chrysler gets a lot of brands and nameplates in the deal – Willys, DeSoto, AMC, Plymouth, etc., and for the nameplates, model names like Rambler, Fire Arrow, Jeepster, Valiant, Hornet, etc. And Chrysler owns a couple of other nameplates that they bought outright from other manufacturers – e.g., Chrysler owns the “Scout” model name, which they bought from I-H a couple of years ago, but have never put on anything.
How is this going to shake out? Here’s my prediction: General Motors will acquire Chrysler. They are the first ones to the negotiating table and have the upper hand over any other would-be buyers. DaimlerChrysler wants it to go away so badly, and so quickly, that they will basically just give the company to General Motors, write off Chrysler as a bad dream and walk away. I don’t think it’s the best thing GM can do with their resources (time and money) right now, but I have a feeling that this is how it will be when the dust settles.