General Motors (GM) is getting closer and closer to taking Chrysler off the hands of its owner, private equity giant Cerberus Capital Management. If GM can come up with funds—perhaps as much as $10 billion—from the government (BusinessWeek.com, 10/28/08) to solve its problems and help restructure the smallest of the Big Three, it could be a done deal.
Assuming it happens, show 'em what they won, Vanna. It's an 83-year-old car company that's badly in need of restructuring. That's the problem. GM has been lousy at restructuring.
GM's strategy all along has been to grab Chrysler and its $11 billion in cash and estimated $35 billion to $40 billion in yearly sales, and then slash overhead, dump unwanted products and plants, and remake the combined company into a profitable business. Industry sources say the two sides still have many issues to settle. There's some agreement on how to resolve them, but ironing out the remaining details could take a week or more.
GM's Losses Soar in 2008You would think GM executives would be good at this sort of thing by now. The company has decades of experience at it. GM had 215,000 union workers in 1998. After 10 years of retiring union workers and buying others out, GM now has about 64,000. But in all of that time, GM has only occasionally made real money selling cars in North America.
In the past three years, GM bought out 52,000 workers and bragged that it cut $9 billion in structural costs. But in 2006 and 2007, GM lost about $2.3 billion in North America on an adjusted basis. That happened before the mayhem of this year's fuel price spike and credit crunch kicked in. This year's losses have topped $15 billion.
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