There has been a lot of discussion, as well as speculation, about the merger/acquisition talks between General Motors and Chrysler owner Cerberus. General Motors sales have fallen dramatically since the beginning of the year with the company posting a 15.6% loss in September and a 45.1% decrease in October (when compared to the same months in 2007).

Obviously, General Motors is not in a position to be discussing an acquisition but to talk about buying Chrysler; that just did not make much sense to me. In September, Chrysler’s sales were down 32.8% and the company posted a 34.9% decrease in sales for October. Add these large drops in overall sales to the fact that Chrysler is closing plants and stopping the production of the Chrysler Aspen Hybrid/Dodge Durango Hybrid and from the outside, the deal just does not look ideal for General Motors.

What bugged me was that the auto manufacturers were looking for government help to make the acquisition a reality. I understand that the Detroit 3 are an important part of America’s auto history and that the impact of one going under could be felt far and wide but the auto industry isn’t the only segment of the United States economy that needs some serious attention.

The CEO of General Motors, Rick Wagner, held a conference call with journalists today and stated that the talks were off.

“We have recently explored the possibility of such an acquisition based on the analysis that it would strengthen our industry position in the long term,” Wagoner said. “We’ve concluded at this particular time that we are better off to put 100 percent of our efforts on the liquidity side. We’ve set aside such (acquisition) actions as a near term priority.” (Source: Automotive News)

A Chrysler representative acknowledged the statement but the only response to GM’s announcement was that Chrysler LLC would continue its journey towards becoming a profitable company once again.

Again, from the outside, this decision by General Motors was pretty much an obvious decision. On paper, the deal looked bad. Neither company was in a period of growth and both were discussing serious cutbacks (read Chevy Volt Safe from GM Cutbacks). While the acquisition of an underperforming company by a company that is profitable would be a risk worth taking, the act of considering the acquisition of a company when your sales tanked by over 45% is simply irresponsible.

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Filed Under: Chrysler, gm

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