One of Big 3 Might Not Survive

Daniel Howes: Commentary
One of Big 3 may not survive
The truth about Detroit's painful automotive transformation, marked by new products, concessionary labor deals, asset sales, plant closings and job cuts, is that none of it will be enough soon enough.
Instead, a global credit crisis, plunging consumer confidence and abysmal corporate finances are forcing once-proud companies and their senior executives to flail for even more disruptive answers. They won't be any easier to find than back in the 1950s, when Detroit's independent automakers -- Packard and Studebaker, Nash and Hudson -- hastily married up in an effort to fend off the market power of General Motors Corp. and Ford Motor Co.
They failed. Today's thinking atop the automakers: Do almost anything to avoid bankruptcy, dismembering operations, invalidating decades of promises to employees and retirees, gutting a 70-year relationship with the United Auto Workers and staining the legacies of men named Ford Jr. and Mulally, Wagoner and Nardelli.
The details of a would-be "merger" between GM and Chrysler LLC or whoever else, or the fact that GM also talked to Ford, are far less important than confirmation that Chrysler's owners want out and that GM is desperately looking for a Plan B because it is running out of cash and time, which these days are one and the same thing.
How else to read GM's feeble attempt to knock down reports of tie-up talks with Chrysler and Ford? Or the implication that increasingly dire circumstances could force it to seek a "bailout" from the feds? Or Barack Obama's call for speeding low-cost loans to Detroit's automakers? Or the fact that GM is asking two Detroit pension funds to buy its Renaissance Center headquarters and then lease it back -- all so the General can pocket somewhere between $250 million and $500 million?
All options are options. You know things are serious, that GM's cash burn is accelerating and its options are limited, when a presidential nominee ups the bailout ante Monday and GM's CFO last week personally makes an investment pitch to pension reps for Detroit's cops, firefighters and city employees.
Another reality: Chrysler's owner, Cerberus Capital Management LP, wants to make a deal -- with anyone -- that will free it from the black hole that is a Detroit-based automaker. Lest there be any doubt, the private equity shop would gladly sacrifice Chrysler, its employees and retirees to GM's corporate ax if it can extricate itself from an industry it never fully understood.
Using the word "merger" to describe a combination of GM and Chrysler is verbal dishonesty of the worst kind. Whole swaths of Chrysler engineering, manufacturing and product development would be collapsed into GM; redundant support staffs would be trimmed; more plants would be closed and more jobs cut; Chrysler communities would be devastated.
And GM would eliminate a competitor in a "neutron bomb" kind of deal that eliminates jobs and the people in them but leaves valued hard assets and, presumably, Chrysler's corporate cash hoard intact. Which is the point.
Chrysler wouldn't be merging with GM so much as be submitted for its own execution. In exchange, Cerberus would assume total control of GM's GMAC finance arm, a business the financial engineers at Cerberus better understand and assume will return someday to normalcy and profitability.
The Big Lie in all this is how disingenuous Cerberus has been since the get-go: Cerberus's commitment to Chrysler, reiterated repeatedly by its hired hands and founder Stephen Feinberg, apparently lasts only as long as they say it does -- that is, long enough for Cerberus to cut its losses and for CEO Bob Nardelli and his top boys in Auburn Hills to reap their change-in-control payouts.
GM needs more brands, more plants and more dealers like it needs another credit crunch. Would the incremental volume of, say, merging Dodge Ram pickups with Chevy Silverados or combining the Chrysler minivan platform with GM's crossovers -- a multi-year undertaking -- deliver revenue worth waiting for? And would it come too late?
GM's directors aren't keen to embrace a Chrysler deal with Cerberus because they realize the remedy for what ails GM won't come from swallowing a competitor. It'll come from buying enough time to survive the imminent shakeout because -- and I wish I could say otherwise -- one of Detroit's Big Three may not.
Daniel Howes' column runs Tuesdays, Thursdays and Fridays. He can be reached at (313) 222-2106 or dchowes@detnews.com.