Auto Service World
News   October 30, 2008   by Auto Service World

Consultant says GM merger would eliminate most Chrysler vehicles

A merger between General Motors and Chrysler LLC would result in the closing of as many as half of Chrysler’s factories and elimination of all but about seven core models, according to a report by consulting firm Grant Thornton LLP.
As reported on Automotive News, a deal also could result in a loss of 100,000 to 200,000 jobs at the two automakers, suppliers and other industry stakeholders, said Kimberly Rodriguez, principal of Grant Thornton’s automotive practice.
Rodriguez said she believes negotiators could reach an agreement in principal as soon as Tuesday, Nov. 4, election day. Reuters reported yesterday that GM and Chrysler’s owner, Cerberus Capital Management LP, have resolved major issues and the final form of any accord will depend on financing and U.S. government support.
“Chrysler as we know it will cease to exist very soon,” she said at a briefing with reporters. “There are few options available to either company.”
Chrysler now has 14 factories, two of them already scheduled to close: Newark, Del.; St. Louis South.
Chrysler has also offered its Viper business for sale, along with the Conner Avenue plant in Detroit where the sports car is made. Grant Thornton believes an additional four plants could close. Among the plants on the cusp would include Sterling Heights (Chrysler Sebring, Dodge Avenger), Toledo North (Jeep Liberty, Dodge Nitro), St. Louis North (Dodge Ram) and Saltillo, Mexico (Dodge Ram heavy duty trucks).
The blended companies would command about one third of U.S. auto sales.
In a related development, if GM and Chrysler get federal aid, Ford Motor Co. will expect some help, too. Ford executives are staying in touch with federal policy makers and “the powers that be” to make sure they understand the challenges Ford also faces, said Mark Fields, Ford’s president of the Americas.
“We just want to make sure we continue that ongoing dialogue and make sure that, whatever happens, there’s a degree of parity,” Fields told reporters at a press event today.
Rodriguez acknowledges the merger of GM and Chrysler was not “an optimal solution,” but is still better than the alternatives, which would include one or both of the companies going out of business.
“Despite the significant number of families that will be impacted, the benefits of combining the two companies are both structural and strategic,” Rodriguez said.
Consolidation of the dealer bodies of both companies would likely accelerate with a merger, according to the Grant Thornton study. The two companies have about 22,000 dealer franchises, more than half of those in the United States.
The remaining Chrysler dealers would have many fewer vehicles to sell. Grant Thornton estimates Chrysler now has 26 models, but only seven are core. Surviving Chrysler vehicles would likely be the Dodge Ram pickup; Chrysler and Dodge minivans; and several Jeep models, including the Wrangler and Grand Cherokee.

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