Industry Report: Chrysler to be Sold to GM?

In one of the most unlikely sounding news stories to come across the wire in recent memory, Automotive News reported that General Motorsis “in talks to buy the Chrysler Group in its entirety”.

It seems that the two automakers have been in talks, which may be hardly more life altering than the talks Ford had with Toyota recently, in which they reportedly discussed the potentiality of sharing development costs on a new product and/or technologies and denied any speculation about the Japanese giant buying into the Dearborn automaker.

The difference with the Chrysler/GM talks is that DaimlerChrysler CEO Dieter Zetsche commented earlier this week that all options were open for its struggling North American unit. To many, this meant that it would be available for sale if the right deal could be struck.

While the casual observer might be dumbfounded at why two struggling North American automakers could somehow believe that joining together might allowfor greater strength in the marketplace, it’s possible that the world’s largest automaker, concerned about losing its number one spot to Toyota, might want to simply buy its way to greater sales numbers.

More likely, however, is that a potential deal between GM and Chrysler Group could be merely focused on the joint development of a new vehicle or technology, as was done with the Dual-Mode Hybrid project, together with BMW. Some have speculated cooperation in building a large sport utility vehicle, but as expected, GM’s spokesperson made no specific comment.

"We often have discussions with automakers routinely. We don't comment on speculation of discussions," GM spokesman Tony Cervone told Automotive News.

It was no shock that DaimlerChrysler had nothing to say about the report either, but nevertheless shares in DCX rose in seeming reaction to the report while GM shares fell slightly, which, if believed to bedirectly associated to the speculation, gives a pretty good indication that GM shareholders think it’s a bad idea.

If Zetsche was trying to shake up the market with his aforementioned comment, he’s done a pretty good job. No doubt he’s also shaken a few of his colleagues within DaimlerChrysler’s Auburn Hills operations, a division he ran for years before taking the reigns as top man in Stuttgart. It also might feel like a slap in the face to those at Chrysler Group who celebrated his rise to the top job, hoping that having a friend in high places would secure their position under the automaker’s umbrella.

Truly, it would seem that the politically incorrect Chrysler, Dodge and Jeep brands are a bit out of step with the times, with all the attention that environmentally friendly alternative drivetrains are getting and the reality that Jeep isthe only nameplate to offer anything other than gasoline power. Dodge is especially defiant in its advertising, winning over disenfranchised buyers who are sick and tired of hearing about liberal concerns.

The automaker’s Smart brand, on the other hand, is the environmental poster child, leading the way into a bright new smaller-is-better future, despite the fact that it can’t sell enough cars to turn over a profit. Most likely its foray into the North American market will exacerbate its profitability problems due to increased costs, not curtail them.

In the end, while Chrysler is a stronger brand than it was a decade ago, and Dodge is iconic for its rebel attitude, the legendary Jeep badge is still the pièce de résistance for any potential suitor, including GM if it were seriously in the running. While South Korean giant Hyundai might seem the more likely candidate or a major supplier like Magna, which already produces entire cars for DCX at its European plant, the status quo within DaimlerChrysler will probably continue, as there aren’t too many players in the market for unprofitable automakers these days.