GM & Chrysler, …Ugh!

Several news sources are reporting that GM and Chrysler are getting closer to a deal (see GM, Chrysler Merger Talks Accelerating or GM and Chrysler Step Up Talks).

For reasons that I detailed in my previous post (see A Disastrous Deal), this does not strike me as a sound strategic merger. Again, I’m  not a big fan of combining two failing firms in the hopes of creating one healthy one. All you end up with is one larger bad firm instead of two smaller bad firms.

What’s more, the aforementioned news sources are both reporting that GM and Chrysler creditors are supporting the union. For example,

JP Morgan Chase, a big holder of Chrysler bank debt, is also pushing for the deal…

…the two sides are seeing strong support from banks and other potential lenders that are eager to see a deal done… (quote via Calculated Risk)

Of course lenders are supporting this deal. Any deal decreases the chances of default – not because the combined entity will have a stronger balance sheet and/or a stronger business model, but simply because it creates an entity that the government will likely deem “Too Big to Fail”!!

I find it sad that preferential treatment of this sort may be motivating this deal.

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One Response to GM & Chrysler, …Ugh!

  1. tbrooks3x says:

    You’re absolutely right I agree with you Robert this merger takeover whatever you will call it these days. Spells disaster not only for the Chrysler employees also GM employees, why one failing company would want to buy another is beyond me. GM tried before to buy Chrysler at no avail. I think they’re both just looking for Government Bail out. Although, it might put thousands of employees back to work, this means nothing if the cars aren’t selling. No job, no money, no buying power! Why don’t the government bail out the millions of hard-working middle class families, we can use the 80 billion plus that they’re giving to these greedy business conglomerates to-go on shopping sprees. Maybe than some of us can keep our homes, and life saving. If the government would’ve bailed out the working class, the my would’ve been put back into the economy. One Hand washes the other..

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