GM wants $10 billion in aid to buy Chrysler - DodgeIntrepid.Net Forums - Dodge Intrepid, Concorde, 300m and Eagle Vision chat
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post #1 of 32 (permalink) Old 10-29-2008, 08:21 AM Thread Starter

 
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Post GM wants $10 billion in aid to buy Chrysler

In the latest development of The Incomprehensible Union, General Motors is reportedly asking the U.S. government for $10 billion — on top of the $25 billion loan approved recently — to help it merge with Chrysler. The supplemental infusion would give the government, i.e. you and me, a stake in the merged company in the form of preferred stock, would see the government taking over pension obligations and provide a credit line for operations.



The government is weighing the request since it’s likely that no federal official wants to be on the watch that saw the instantaneous vaporizing of two American icons and hundreds of thousands of jobs. The government has asked that as many jobs as possible be spared, and GM said “Sure!” Yet for a merger where cost savings and redundancy elimination have been the headlines, we don’t know why anyone believes GM-Chrysler wouldn’t jettison a whole bunch of the 11 brands, 10,000 dealers, and 100,000 union jobs. And that’s just for starters.

Which is one of the (many) reasons we still don’t understand the GM-Chrysler union. The additional $10 billion we can swallow — after all, the government spends much more than that on projects that could be considered far more dubious than trying to save an astronomical number of jobs and businesses. And we know what Cerberus gets from the deal. We’d like to find out what the GM guys see that makes this merger attractive… other than the fact that Chrysler has $11 billion in cash.
The request for federal aid is being led by GM. The automaker’s chief executive, Rick Wagoner, was in Washington in recent days to lobby administration officials.

Cerberus has not been involved in any of the lobbying efforts, a source familiar with the matter said.

GM has been in talks with Cerberus about buying Chrysler since last month but the discussions have been snagged by difficulty in securing investment or financing at a time when credit is tight and global auto sales are in rapid retreat, others close to the talks have said.

A decision by the Bush administration to provide the government’s first funding for the auto sector since the $1.5 billion bailout of Chrysler in 1980 has been widely seen as the merger’s best chance for success.

“The automakers are facing a maelstrom and that’s why I think an unprecedented government infusion could happen,” said Efraim Levy, an automotive equity analyst with S&P.

An injection of $3 billion in equity to support a GM acquisition of Chrysler would be roughly equivalent to the current, depressed value of the top U.S. automaker.

It would also give U.S. taxpayers a large stake in the turnaround of a struggling auto industry that employs more than 350,000 American workers and is credited with supporting employment for another 4.5 million in related fields.

Analysts perceive GM, Chrysler and rival Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) as driven to the brink of failure by a combination of management missteps, slowing global growth and problems in credit markets.

Now, in addition to taking a stake in what would be the world’s largest automaker by volume, the U.S. government is also being asked to provide support by taking over some $3 billion in pension obligations, the first source said.

The final component of the proposed support would be a credit line that could include U.S. government purchases of commercial paper to relieve short-term pressure on liquidity, the person said.

GM could not immediately be reached for comment. Cerberus and Chrysler had no comment.

TOO BIG TO FAIL?

A combined GM-Chrysler would control roughly a third of the U.S. auto market by sales and would face immediate pressure to cut costs stemming from excess capacity in almost every facet of its business. Those would include a stable of 11 brands, some 10,000 dealers and 97,000 union-represented factory workers.

But one of the conditions of a merger would be that GM-Chrysler spare as many jobs as possible to win broad political support for the government funding, people familiar with the merger discussions said.

Many analysts are skeptical that balance can be struck.

“I still think they need to make deep cuts to survive,” said IHS Global Insight analyst Aaron Bragman.

The roughly $10 billion in government funds to support a merger would be in addition to whatever funds would be allocated under an already-approved $25 billion program to provide low-interest loans to the auto industry for retooling to make more fuel-efficient cars.

A government rescue package would come at a time when investors and creditors are increasingly concerned about the ability of U.S. automakers to survive a punishing downturn in sales now expected to continue into 2010.

“Nobody reasonable is going to tell you that next year we’re going to be out (of this crisis),” Carlos Ghosn, head of Nissan Motor Co (7201.T: Quote, Profile, Research, Stock Buzz) and Renault SA (RENA.PA: Quote, Profile, Research, Stock Buzz), told a business seminar in Tokyo, adding the worst is yet to come.

Ghosn predicted U.S. auto sales would stay at an annualized rate of 12.5 million vehicles through March. U.S. car sales slumped by 26 percent last month to that level.

Moody’s Investors Service cut its GM rating on Monday deeper into junk territory on the view that GM’s liquidity would continue to erode into 2009. The ratings agency also cut Chrysler for similar reasons and said it might cut Ford.

GM has a market capitalization of just over $3 billion based on Monday’s close and roughly $10 billion of outstanding debt. Chrysler’s privately held auto operations were valued at zero last week by Daimler AG (DAIGn.DE: Quote, Profile, Research, Stock Buzz), which holds the 19.9 percent of the struggling automaker not owned by Cerberus.

Chrysler’s U.S. sales have tumbled by 25 percent this year, almost twice the rate of decline for the overall market. GM’s sales had dropped almost 18 percent through September.

GM’s shares have slumped nearly 80 percent this year and its market value has dropped below what it was in 1929.

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post #2 of 32 (permalink) Old 10-29-2008, 08:48 AM
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"Lend me 10 billion dollars so I can buy this company and shut them down"...yup, sounds like something GM would do.
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post #3 of 32 (permalink) Old 10-29-2008, 09:17 AM
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Originally Posted by cokey11 View Post
"Lend me 10 billion dollars so I can buy this company and shut them down"...yup, sounds like something GM would do.
Guuh...perish the thought. Heard that yesterday too from a Chrysler employee.

Might as well replace the ram head on my hood with a bowtie. May GM have mercy on our cars.
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post #4 of 32 (permalink) Old 10-29-2008, 11:22 AM
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This merger will destory everything I have for Chrysler I've never been a fan of GM
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post #5 of 32 (permalink) Old 10-29-2008, 11:51 AM
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They are driving us toward Fords, or heaven forbid: Toyota.
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post #6 of 32 (permalink) Old 10-29-2008, 12:24 PM
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At least they can't take our Intrepids/300Ms/Concordes/LHSs away from us... we've got the true Chryslers/Dodges.
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post #7 of 32 (permalink) Old 10-29-2008, 01:18 PM
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At least they can't take our Intrepids/300Ms/Concordes/LHSs away from us... we've got the true Chryslers/Dodges.
Amen brother!
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post #8 of 32 (permalink) Old 10-29-2008, 01:20 PM
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At least they can't take our Intrepids/300Ms/Concordes/LHSs away from us... we've got the true Chryslers/Dodges.
No the 2.7's in those will do the job. lol Jkjkjkjkjkjkjkjk

I have always been a fan of GM. Hell, the Intrepid was our 1st and only Chrysler. 140k miles I can't complain.
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post #9 of 32 (permalink) Old 10-29-2008, 03:02 PM
 
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not fair not fair at all i wish i was rich so i can buy chrysler and make sure this would never happen but then again if i were rich...
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post #10 of 32 (permalink) Old 10-30-2008, 01:01 PM
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not fair not fair at all i wish i was rich so i can buy chrysler and make sure this would never happen but then again if i were rich...
I wish Chrysler could just hold out until 2010 when their electric vehicles will hit the market. If Chrysler sells out to GM, they'll never see production because GM will want to force that friggin' Chevy Volt on everyone, which looks like Chrysler's Nassau if it were beaten with an ugly stick!



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post #11 of 32 (permalink) Old 10-30-2008, 01:30 PM
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GEE GM wont cut it's fat ass to many brands now Co. It wants 3 more brands. Bye bye Dodge, Jeep, Chrysler. Next they will want another 10 billion to buy out Ford. Then ax that brand so they think that buyers will come over to GM. ( my be for a short time, until they find out why nobody else buys GM POS's) Right sure they will NOT. They will go to other brands Japan, Korean, German Ect... If you want a new Dodge Challenger buy it now. The way it looks now it wont have the 4 year run of the 1st gen Challengers.

Mine 2012 Black Challenger SXT. Hers 2005 Red V-6 Mustang, the Son 1997 Red Plymouth Breeze
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post #12 of 32 (permalink) Old 10-30-2008, 02:37 PM
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Maybe GM does not want to let go the portion Chrysler has on the R&D of the new (HEV) Hybrid Electric Vehicles. The new GM monster Hybrid SUVs have powertrains developed by GM with Mercedes-Benz, BMW and (yes) Chrysler.
In this odd team, Chrysler also has the strongest part on the development of electric powertrains. So, not a bad investment.
This does not mean they wont kill the brands.
And the merger will be a great gift to Ford. Even with all the cash Ford has, a GM operating on Chapter 11 is just too big of a headache with what most may see as unfair competitive advantage (mandatory stay on creditors, unions forced to accept cuts, etc.)
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post #13 of 32 (permalink) Old 10-30-2008, 08:14 PM
 
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this calls for a sabotage lets find these people and slash there tires muahhaha
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post #14 of 32 (permalink) Old 10-30-2008, 08:41 PM
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Cut from an msnbc article today:

He also said any consolidation could mean the death of at least a couple of brands, such as Chrysler's Dodge nameplate. In 2004, GM killed off Oldsmobile, the oldest U.S. automotive brand name at the time, after efforts to revive it failed.

This is getting effin scary........my Intrepid is going to become an Impala, and my Ram a Silverado?? NOOOOOOOOOOOO!!!!

We should get a movement together of all the millions of mopar enthusiasts -- have everyone donate $50 to save Chrysler....

Last edited by Daytrepper; 10-30-2008 at 08:45 PM.
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post #15 of 32 (permalink) Old 10-30-2008, 10:41 PM
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if it goes threw what will i do for parts and everything else. if they buy and later on in the future i cant fix my trep and cant buy another dodge, im walking.
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