General Motors and Ford and other Tabloid Stories

A merger for two of the Detroit Three would create a combined company with over $350 billion in revenue, and save additional billions in massive overhead costs. This could tide them over the current economic slump and hiking fuel prices.

However, it would also compound their current rudimentary weaknesses, such as excess of plants tooled for trucks and SUV’s, weak brands that could use redesign, and a lack of a decent fuel efficient lineup. They are both suffering losses in North America in similar categories.

So the billion dollar question is: will it happen? Uh, no. Apparently general sentiment within the two companies is that such a merger taking place during turbulent times for both companies would only prove to be a distraction. In fact, this merger idea being tossed around can only be described in one word: desperation.

Is it impossible? No. Megamergers have been contemplated before: Ford nearly merged with Fiat a few decades ago. In better times, GM considered acquiring Chrysler until Cerberus Capital Management came onto the scene.

Our take? Ford could very well make it out of these poor auto industry times with billionaire investor Kerkorian giving it a jumping base. Besides, a  merger now might just drag Ford down into the grave marked with a GM headstone. Either way, such an event would be incredibly complex, as well as costly.


via Business Week