Chrysler and GM: The Folly Continues

The papers are still rife with stories about a possible merger between Chrysler and GM. As I have said in the past, this merger makes almost no sense from a model line up point of view, and this was confirmed by a source who recently reported that the new company would consider selling some lines off, like the Dodge Ram pick up line. Naturally. They have completely overlapping and competing line ups in this fast shrinking market.

This kind of shallow thinking is what got Detroit - and especially GM - in trouble in the first place. Firstly, Dodge has just launched a brand new (and vastly improved) lineup of Dodge Ram pick ups. The Chevy/GMC pick ups were redesigned about two years ago. But sure, sell the newly designed models.Who will buy the Dodge Ram product lineup? Not the Japanese. Toyota is still nursing a gunshot wound to the foot that it took by launching the new full size Tundra pick up amid rising gas prices and a declining economy. Nissan launched the Titan in the same segment some time ago. The Koreans have their hands full. Kia launched a full sized SUV last month (need I say more?) and Hyundai, try as it might, has trouble being seen as an upscale car maker.

The Europeans are unlikely ever to want to get into the full size pick up segment in meaningful quantities. So, I ask again: who will buy the Ram line? Indians? Maybe. Mahindra and Tata are itching for an "in" into the North American market, but Tata has already bought Land Rover and Jaguar, and will have its dance card full trying to fix these brands in the US for the near future at least.

So while selling a vehicle line sounds wonderful on paper and makes a great sound bite, it is little more than that.

GM is really in a desperation samba, looking for cash at any price and Chrysler's stash looks tempting. But the cost of integrating the two companies would eats most - if not all - of that cash in the medium term. Cerberus of course, is still the big winner if this comes off, having washed its hands of Chrysler and gained GMAC to boot.

GM needs clearer thinking and some calm. Current management seems lost and desperate, and has lost sight of the real problems, which include years of product and quality neglect and attention only to profitable lines, while failing to turn unprofitable products into winners.

Only a herculean effort by a competent management team can save GM at this point, along with a healthy bailout. As of today, it has neither.