As discussions between GM and Chrysler heat up, there's a steady flow of questions about road blocks that could stop this merger of American auto giants. Any other time, I'd agree with some of the points being raised. But given the economy and the weakened state of the auto industry, I think few of these are going to stop GM from acquiring Chrysler- IF the country's largest automaker decides it wants this deal.
• The Banks
Sure the commercial paper market has stalled. Yes, this deal could create greater challenges for GM as it tries to get back in black. That said, the largest banks already have billions tied up in GM and in the auto industry. Their primary focus now is making sure GM avoids sliding into a bankruptcy that could cripple this industry and their investments. So one way or another, the financing will come through for this deal.
Sure, if GM buys Chrysler the combined company would sell roughly one out of every three vehicles in the U.S. and the combination of Dodge, GM, and Chevy would control over half the pick-up market. Still, I doubt regulators will stop a deal that will be viewed as crucial to the health of the U.S. Auto industry. There will still be plenty of healthy competition in both cars and trucks.
We've already heard UAW President Ron Gettlefinger warn that his union will not stand by and watch if Chrysler's sale means the elimination of union jobs. And there is no doubt the UAW would not be happy to see Chrysler's hourly work force gutted. But the options for the UAW are few. If GM needs this deal to become stronger, then the union will have to see if it can get the best buyout possible for those members who will be eliminated. In an industry going through contraction, it's harder to keep hourly labor jobs from disappearing.
The bottom line: if GM wants to cut this deal with Chrysler's parent, Cerberus Capital, it will happen. Whether it is a smart move is a completely different question.
- GM Deal For Chrysler Said To Be Coming Soon
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