Report: GM could eliminate Chrysler after acquisition

Late on Friday it was reported that General Motors was in preliminary talks with Chrysler’s parent company Cerberus Capital Management over a possible deal to acquire the Auburn Hills carmaker. Since then Chrysler CEO Bob Nardelli has confirmed that the talks had taken place but stated that no final decision had been made.

What hasn't been discussed are the potential benefits or synergies that could be formed by the two struggling carmakers merging.

One of GM’s main objectives in its restructuring strategy is to streamline its operations by reducing the number of brands and vehicles it sells, as well as the number of dealerships that it either owns or that sell its vehicles.

This has left many wondering why GM would want to take on all of Chrysler’s problems, including its associated models and dealers. One possible scenario, and one of the most likely options for GM, is to absorb Chrysler and put an end to its 83-year existence.

The information was revealed by an inside source at GM, who told The Detroit News that GM was considering a number of options for Chrysler but this was the most popular. The move would be similar to Chrysler's own 1987 acquisition of American Motors Corp. (AMC), and would allow GM to retain some of Chrysler’s 2.7 million sales while also eliminating its competition.

According to analysts, Chrysler's only assets of value to GM would be its Jeep brand and minivan range. The real benefit is to reduce capacity in North America. Not surprisingly, unions are opposed to the idea as such a move would eliminate thousands of jobs, cause more plant closures, and have a devastating effect on automotive suppliers.