Between the Lines: Jalopnik’s Ray Wert on GM - Chrysler Merger

Between the Lines: Jalopnik’s Ray Wert on GM - Chrysler Merger
http://tinyurl.com/3mbwej

Last night, the New York Time “broke” the story that General Motors and
Chrysler/Cerberus were discussing a merger. The report lacked only one
crucial component: facts. As RF reported in his initial blog on the
subject, the story unravels by paragraph two. We learn that the entire
story is based on “two people close to the process.” While anonymous
attribution is common new industry practice, a story without independent
corroboration is a nothing more than rumor— especially when it defies
common sense. General Motors’ assertion that they routinely talk to
other manufacturers about collaborative efforts doesn’t count. But it
does reveal the truth of the matter.

In fact, the GM – Chrysler/Cerberus meetings are an open secret. As The
General’s spinmeister intimated, GM regularly engages in tech sharing
discussions with a wide range of carmakers. Given Chrysler’s
yet-to-be-realized tie-up with Nissan, its decision to provide re-badged
minivans for VW and ongoing attempts to create a Chinese hook-up, GM is
a logical “partner” for Chrysler ongoing campaign to outsource product
development. And cut costs.

GM and ChryCo could be discussing rebadged Malibus. Or a Chrysler badged
Cobalt. With materials costs soaring, the two ailing American automakers
might be examining the possibility of sharing resources. Or looking for
economies of scale re: suppliers. And, lest we forget, General Motors
owns 49 percent of endangered auto and mortgage lender GMAC; Chrysler’s
masters hold the other 51 percent. If GM and Chrysler are NOT talking to
each other about GMAC’s future, there’s something seriously wrong (more
wrong?) with both companies’ executive management.

It’s no wonder Times scribes Vlasic and Sorkin backpedal on their GM –
Chrysler merger story. They tell us that their two sources estimate
chances of a merger are “50-50.” There could be “significant
roadblocks,” not including the fact that sewing two losing companies
together merely makes a bigger losing company. But the real
argumentative implosion comes buried in the story: “neither side has yet
to dig into each others’ private financial books and records.” How
serious can the merger talks be if the lawyers and accountants haven’t
even begun diligence? Answer: they can’t.

Clearly, the providers of “all the news that’s fit to print” didn’t give
the merger story a fitness test. In fact, this is a classic example of
what GM shill Rush Limbaugh calls “drive by media.”

The 24 hour news cycle (of which this writer, typing after midnight, is
a member) was quick to pick up the story and discuss all the
implications. The CNBC network, “the recognized world leader in business
news,” called in the big guns for comment: Ray Wert of Jalopnik. While
we understand the mainstream media’s ongoing fascination with the “new
hotness” of blogs, Wert screwed the pooch on this one.

Wert claimed that GM and Chrysler “have two different lineups that
actually are very complementary.” This is just wrong. GM and Chrysler
have nearly identical lineups, with some niche-product distinctions.
Recognizing this, Wert contradicted himself in his next comment.
“They’re both looking to sell a lot of large trucks and large SUVS, and
it makes sense for them to manufacture them on the same platform.”

The CNBC hosts ask Wert about the financial issues in a merger. His
vaguely dishes “My assumption is that Cerberus has probably bit off a
lot more than they can chew, and with credit kind of crunching in right
now it makes a lot of sense for them to try to jettison a company that
isn’t providing something that isn’t to their core business plan.”
Except that’s not what anyone is talking about. The story from The New
York Times: Cerberus would end up with an enormous stake in the
hypothetical GM-Chrysler firm.

CNBC concludes by asking Wert about potential issues with a merged
GM-Chrysler and organized labor. “I think it’ll be easier for them to
get some economies of scale on UAW talks. It’ll be easier to work out
one deal as opposed to two deals.” Efficiency in labor talks is a
secondary goal (talking for less time, paying fewer labor lawyers). The
actual issue is concessions. There is no quantitative academic evidence
to suggest that it would be easier for a gargantuan company to negotiate
with the UAW and CAW than two very, very large companies. In fact, odds
are good the negotiations would be even stiffer.

CNBC failed in its background research. They should have read the
editorial Wert published the same day: “GM Will Go Bankrupt: Why That
May Actually Be Good For The General.” Considering Wert’s previously
held belief that GM would benefit from Chapter 11 filling, why did he
suddenly decided that a GM-Chrysler merger be well-advised? Something to
do with publicity perhaps?

All of this discussion blatantly ignores the glaring issue: a
GM-Chrysler merger would be a disaster. And that’s the truth.