GM Chrysler Deal
February 26, 2007 5:28pm by Barry Ritholtz
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Well, it just goes to show that you don’t appreciate the finer points of high finance.
Seriously. A company with too many divisions and too many brands is buying another company…to increase the amount of divisions and further increase redundant brands. Brilliant.
I think you vastly underestimate the investment potential of GM.
I bought some back when it was ~$20 and have been adding periodically. After Kirk left and the stock took a hit, I bought some more. If it takes a hit as a result of buying Chrysler, I’ll buy still more.
Following this approach, I’m up ~60% on my overall investment, including reinvested dividends.
Even if the business fundamentals only go from “absolutely horrible” to “terrible,” as long as the stock goes up and I make money, I won’t complain. If business fundamentals become “good,” and the stock goes to 1000, so much the better.
GM and Ford would be interesting political bets. If health care reform were to take health care costs off their hands (as is the case for their Ontario plants), the stock would be worth much more.
Wonderful and charming deal? A dying Dino trying to survive by swallowing another dying smaller Dino? Does it help? let’s keep our fingers crossed.
Alice in Wonderland
Sirius-ly…….(joke)
“f health care reform were to take health care costs off their hands (as is the case for their Ontario plants), the stock would be worth much more.”
I hear this a lot and have to laugh. Outside the upper midwest and the elderly, nobody buys GM cars unless they have no other choice. (Trucks? Yes. SUVs? Yes. Cars? Straight to the rental counter, or at BEST, to the guy with bad credit in that crackhouse down the street).
Lower health care costs would just make their awful cars a bit cheaper. It wouldn’t make them any BETTER. We all get to try these things out at the rental counter – so don’t try to tell me it’s just press bias (as you hear at sites like autoblog).
I couldn’t agree more that this talk of a merger is ridiculous. GM must get its house in order. This reminds me of Builders Square and Hechingers merging to ward off Home Depot. Both were either in bankruptcy or close. Two wrongs don’t make a right.
That said, GM and Ford do have a future. Whether this is the turnaround we’ve been waiting for since 1970 is the question. Crisis creates opportunity…..eventually.
Pros:
* GM would acquire Chrysler’s engineering group. Dr. Z. wasn’t able to do much with it, but he had a pretty decent one before the merger. Chrysler’s strength has always been their engineering group. This group is pretty much solely responsible for keeping Chrysler the minivan leader despite some terrific competition.
* Chrysler is doing well in some of GM’s weak spots. The Dodge Caliber is one of the best in its niche. Chrysler seems to be working hard not to over produce them like they did the PT Cruiser. Generally, Chrysler’s car lineup is better than GM’s.
* Where Chrysler is weak right now is truck sales. Part of this is over production. This is presently a GM strength.
* The Buick franchise would seem to be a natural merge opportunity into the Chrysler brand, allowing GM to sacrifice a brand without sacrificing a market.
* GM seems to better manage mass production rather than boutigue brands like Hummer and Saturn. Ford’s PAG is one of the better companies at managing boutique brands. Anyhow, the only boutique from Chrysler would be the Jeep franchise.
The only thing worth anything in Chrysler is the deal Dodge has with Cummins. Which ever truck maker can manage to put Cummins’ diesels in their rigs will benefit. I’d be buying CMI. For once their fantastic diesels might be wrapped in something besides garbage.