GM-Chrysler on road to merger

Shares of DaimlerChrysler were up by 4.4 percent on the New York Stock Exchange soon after the company indicated that it is considering a sale of its besieged U.S. unit. Trade publication Automotive News reported General Motors as the potential buyer for the Chrysler unit.

Analysts however are in a quandary as to how such reports could be true. Chrysler’s prime aim is to restructure its operations and turn profitable. GM too is in the process of shrinking its operations in an attempt to increase its profit. Thus, it is not clear how would any of the companies benefit from this alliance.

DaimlerChrysler was created in November 1998 through the merger of Daimler-Benz AG and Chrysler Corporation. Today, DaimlerChrysler is a leading supplier of superior passenger cars, SUVs, sports tourers, minivans and pickups, as well as the world‘s largest manufacturer of commercial vehicles.

General Motors (GM) on the other hand is the world's largest car manufacturer. The company was founded in 1908, in Flint, Michigan and is headquartered at the Renaissance Center in Detroit, Michigan, USA. GM manufactures its cars and trucks in 33 countries and own the following popular brands; Cadillac, Chevrolet, GMC, Daewoo, Holden, Opel, Pontiac, Saturn and Vauxhall.

Officials of both companies played down the reports. GM said: "We are not going to comment on the speculation concerning discussions between DaimlerChrysler and GM related to Chrysler."

GM and DaimlerChrysler already pool resources on gas-electric hybrid systems for big trucks in a conglomerate that includes the German automaker BMW. Any further deal would thus go well beyond a limited product development alliance.

Capital Group LLC automotive analyst Kirk Ludtke realized that a collaboration between the two made sense. He commented, “DaimlerChrysler has deep pockets and, if motivated, (it) could probably craft a transaction in which Chrysler becomes affordable. I suspect that they will talk to all the strategic buyers that are willing to listen. GM may just be the first stop."

DaimlerChrysler Chairman Dieter Zetsche is under enormous pressure from the shareholders to turn around the company. He is therefore open to all options related to Chrysler's future, including a spin-off or a sale.