The Detroit News is beginning to confirm what the automotive industry has been speculating about the possible General Motors/Chrysler merger: GM would consume Chrysler. As reported earlier this week, GM and Chrysler’s car business is too similar. Sources are now confirming that if GM buys the pentastar brand, it will likely close most of its operations and merge its few unique elements (the minivans and the Jeep brand) into the General Motors lineup.
This kind of consumption is being compared to the 1987 Chrysler/American Motors Corporation (AMC) merger that killed AMC and kept the lazarous-like Jeep. (Anyone remember the Eagle brand?)
"For GM, the only reason to absorb Chrysler would be to eliminate a competitor," said Aaron Bragman, an analyst at the research firm Global Insight. If GM eliminated Chrysler’s share of the domestic car market (1.5 million vehicles), it would likely eliminate the surplus of vehicle demand that currently exists. The unfortunate cost would be the huge loss of jobs and industry in North America, especially the Detroit area.
In a touch of irony, the Renault-Nissan Alliance isn’t out of the picture yet. If Nissan were to buy Chrysler, then its parent Renault will have come full circle (although it is called the Renault-Nissan Alliance, there is no doubt who is the parent in this relationship.) Renault was the one who sold AMC/Jeep to Chrysler in 1987. If it plays dark horse and buys Chrysler, it will gain back Jeep and many of its original North American factories. Picking up the U.S.’s third-largest automaker may just be an added bonus.