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.
