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Monday, October 13, 2008

More Thoughts on GM-Chrysler Merger

A few more thoughts on the possible merger of GM and Chrysler.

It sounds preposterous because it would add even more brands to GM's already confusing portfolio.  Consider:

  • Cadillac - Luxury
  • Saab - Euro Luxury
  • Buick - Soft near-luxury
  • Saturn - Euro basic / near luxury
  • Pontiac - "Sporty"
  • Jeep - Rugged go-anywhere SUVs and some rugged looking cars
  • Hummer - Rugged go-anywhere SUVs
  • Dodge - "Sporty" cars, manly trucks
  • GMC - manly trucks
  • Chevrolet - full line of basic transportation from small cars to trucks
  • Chrysler - full line of basic transportation from small cars to trucks
Chop too many brands and you starve your dealer network.  Keep too many and you get a big badge engineered mess, or lose efficiency.  The new religion in the industry is to be lean, simple, agile--picking up more brands is like going back to the 1990's.  

On the radio this morning, I heard an interview with the guy who broke the story in the New York Times, Bill Vlasic.  One theory, mentioned in the paper,  is that GM may be after a cash-out deal, where they get a pile of cash along with Chrysler.  This may make short term sense, but it would leave GM with the albatross of Chrysler's crummy products, legacy costs, UAW contracts.

Another possibility is that, somewhat like a star expanding into a huge red giant as it begins the final stages of its life, GM may be trying to grow into a company so huge it can not be allowed to fail.  The government would have to come with support, or risk an economic supernova (or black hole?).   

Also, it would make strategic sense in the long run for GM to off a major competitor.  By removing capacity from the system, it may ensure more business for GM in the future.


Dublin Saab said...

I say f#ck the dealer network. Seriously.

What other product am I not allowed to buy directly from the manufacturer?

I can buy my jeans directly from Gap, my computer directly from Dell, my phone directly from Apple, my paint directly from Sherman Williams, and so on. I can buy pretty much everything directly from the manufacture except a car.

The damn dealer network is a dinosaur left over from 1899 when lack of transportation and communication necessitated a 3rd party at the local level to facilitate sales and service. Then a few decades later the damn dealers bought off law makers to ensure they wouldn't get cut off by direct sales. Bull crap.

When I have to purchase a 30-40k dollar produce and have it serviced after the sale I'd much rather be dealing with a person that got a paycheck from say, GM and not Bill Martin, inc. Why? Simple, the GM guy would want to make sure the GM's interests were served, and GM's interests are served vs. Bill Martin, which only sees me as a mark to skim as much as possible until I go someplace else in a futile effort to find good service.

I hate dealers.

Dublin Saab said...

Or rather, I hate that I am required by law to use dealers.

Anonymous said...

Perhaps they could spell it ChryGM and pronouce it as "crime."

vettefan427 said...

I always heard people say it but I never wanted it to happen because I liked all their brands. But with the economy, and GM's business as it is, I think it is in their best interests to cut all brands except Chevrolet, Pontiac, and Cadillac. All the other brands just overlap too much, and don't make sense. Obviously, with that said, I think acquiring Chrysler would be one of the stupidest things GM could do. Chrysler's cars are not competitive, and once GM takes over, they'll just turn into badge engineered GM's, which would compete with other GM vehicles, which is stupid. Look I'm a GM fan, but I really think GM needs to follow a plan similar to this, and lean itself down.