Three Reasons For GM Not To Buy Chrysler

GM logo, General Motors logo
GM logo, General Motors logo

Ever since word first leaked out about GM talking with Cerberus Capital about buying Chrysler, I've had two basic conversations with those in the companies, in the industry, on Wall Street, and you the reader/viewer.

You either think this is a chance GMshould seize or you cringe at the thought of these two automakers getting together. So, just what is it about this potential deal that scares so many people?

• GM biting off more than it can chew

For this to work, GM may have to cut up to 40,000 jobs quickly, buy out thousands of dealers, and do it in the most challenging auto market since '91. The skeptics doubt GM could pull that off without stumbling.

• GM is looking at this deal as a lifeline and not as crucial to growing.

Skeptics say the best part of this deal for GM is access to Chrysler's cash, the chance to have greater leverage over the UAW, and to buy the financial wiggle room it desperately needs. Not exactly the reasons that make you stand-up and say, "YES! Let's do this!"

• GM's track record of cutting brands and dealers is spotty at best.

The only Chrysler brand of value to GM is Jeep. That means GM would be wise to punt the Chrysler and Dodge brands and get rid of the bulk of the 3,500 Chrysler/Dodge dealers. Killing those brands will be costly (putting a stake in the heart of Olds was way more expansive than GM expected) and given franchise laws in different states, those dealers won't go without a fight. That will create more headaches, costs, and legal hassles for GM.

So there you have it. Now you know why some people think this merger is a horrible idea.

Questions? Comments?