Rumor: GM and Ford Discuss Alliance, Possible Merger

[bon]

Interesting tidbit from Autoblog

"Automotive News reported early this morning that senior executives within Ford and GM have explored the possibility of an alliance, even a merger, in the near future.

The supposed talks between the two Detroit titans began sometime in July, soon after Rick Wagoner and Carlos Ghosn began investigating the benefits of a GM/Renault/Nissan threesome. The sources cited by Automotive News have not been able to confirm who opened the door to the talks, with one insider saying that Wagoner was the instigator, while another source disputes that assertion. It is known that a possible merger was discussed between the General's CFO, Fritz Henderson and Don Leclair, Ford's own CFO sometime in August.

Although the idea of a Ford/GM alliance may seem odd at first glance, one only needs to look at the tremendous stake each company has in the other's continued existence. The most potentially catastrophic scenario would include GM or Ford declaring bankruptcy, leaving their mutual parts suppliers blowing in the financial winds and subsequently cutting off the other from much-needed materials. It could be argued that both would go down and quickly.

Although it's doubtful anything of this magnitude would come to fruition, the dependency each of the players share may warrant a second look at a union between what's left of the 'Big 3.' At this point however, spokespeople for both GM and Ford are relying on the "no comment" approach to get them through the next few days."

[empy]

there is this small issue called US antitrust law...

[Helios]

indeed it would be interesting. this will allow for diversification of business risks, but the lack of focus because of this merger can make managing the diverse interests more difficult. who knows but ford can still run autonomously even under this flagship, or they may just run the course similar to what you're implying.

[mikmik316]

there is this small issue called US antitrust law...

hindi siguro sir... GM is no.1, Toyota no.2, Ford no. 3...

combining GM & Ford makes them no.1, Toyota is still a strong no. 2

So walang monopoly... saka madaming competitors e... Euro, Japs, Koreans...

[jamesvhong]

I read sa isang news site na mag babawas ang FORD ng 40,000 Employees.

Nde kaya connected yun sa pag bawas ng employeer dito or talgang lugi na ang FORD? At may nabasa din ako na kinukuha nila isang sikat at magaling Executive (Engineer) na nag work sa NASA (dati) para maging President ng company.

Sensya nde ko maibigay details kasi nde ko na makita yung mga article na yun.

[niky]

They're getting Boeing's president to run the company.

And the Job cuts are in-line with downsizing and an anticipated drastic drop in market share. Ford's trucks are still selling well, but sales are starting to go down... so they're cutting their losses before they get burned.

A Ford-GM merger would be hellishly difficult... and I'd be weary of merging with GM, as their record in mergers is pretty grim.

But seeing how Fiat managed to dick GM out of a billion dollars, hey, good for Ford.

[mazdamazda]

As to the failed Fiat-GM merger... it's GM who will be laughing after a few years. Sure a few billion dollars might hurt a bit but Fiat's future is more bleak than GM.

As to the Ford & GM merger - well it doesn't make sense for Ford. Ford will be able to weather slower truck sales by even introducing its European lineup stateside.

GM's sights are also focused elsewhere (Korea & China) for salvation.

[number001]

The one below is what really transpired...

GM, Ford Alliance Talks Mark Auto-Industry Shift :Aborted Discussions Reflect Inroads by Foreign Firms, Pressure From Shareholders

By MONICA LANGLEY, NEAL E. BOUDETT and JEFFREY MCCRACKEN
September 19, 2006; Page A3

Aborted talks between General Motors Corp. and Ford Motor Co. about a possible alliance demonstrate the sweeping changes in the global auto industry and the once-unthinkable alternatives Detroit's traditional giants are willing to consider to stay competitive.

The No. 1 and No. 2 U.S. auto makers by market share briefly discussed the concept of an alliance but dropped the idea and plan no further talks, people familiar with the matter said. Their chief financial officers, Frederick "Fritz" Henderson of GM and Don Leclair of Ford, discussed the idea, these people said. The talks were reported yesterday by Automotive News, a trade publication.

Individuals familiar with the situation say leaders at GM and Ford are committed to pursuing their separate restructuring plans. At the insistence of shareholder Kirk Kerkorian, GM also is exploring the idea of an alliance with Renault SA and Nissan Motor Co., although it is unclear if these talks will bear fruit.


Mr. Leclair in an interview declined to comment on any discussions with GM. But he didn't rule out technology-sharing arrangements. He said Ford has a deal with rival PSA Peugeot Citroën SA in Europe for six- and eight-cylinder diesels. "That's the kind of cooperative venture that you need to be looking at," he said.

Ford shares fell 20 cents, or 2.5%, to $7.82, while GM shares were down 18 cents to $31.48 in 4 p.m. New York Stock Exchange composite trading. Ford's drop reflects concerns that the auto maker will still have more capacity than it needs after 2008, running at about 84% capacity by Ford's calculation. Mr. Leclair said it could have shuttered more plants but that "would have been ill-advised." Ford would have to give up vehicles like the Lincoln Town Car that are "incrementally profitable," Mr. Leclair said. He said that Ford will "no longer have excess people, and they are the bulk of the costs at a plant."

Separately, Ford yesterday said outside director John R. H. Bond, former group chairman of London-based HSBC Holdings PLC, will become a consultant and senior advisor to Ford Chairman Bill Ford Jr. He will be paid $25,000 a day, but his maximum compensation will be $262,500 in any year.

Ford also said it would buy the Rover brand name from BMW AG for an undisclosed price. Ford obtained the right of first refusal when it bought the Land Rover business from BMW in 2000. BMW had said it was in talks with China's Shanghai Automotive Industry Corp. about selling the Rover name.

GM, Ford and DaimlerChrysler AG's Chrysler Group have battled each other for decades, but increasing competition from Toyota Motor Corp. and other foreign-based rivals has left all three facing shrinking market share, declining profit margins and rising pressure to rethink their strategies. In the current environment, in which industry leaders are under growing pressure from shareholders such as Mr. Kerkorian to scrap tradition, the idea of a GM-Ford alliance has evolved from unthinkable to merely unlikely.

The discussions began after Mr. Kerkorian and his representative on GM's board, Jerome York, made public their call for GM to consider an alliance with Renault and Nissan, according to a person familiar with the situation. It isn't clear which side made the initial contact. Mr. Ford, then-chief executive, subsequently brought in a new chief executive, former Boeing Co. executive Alan Mulally, and Mr. Ford wanted to assure him that his mandate wasn't just to engineer a merger, according to a person familiar with the situation.

A GM spokesman declined to confirm or deny the discussions. Ford spokesman Oscar Suris said the company won't comment on speculation.

Ford last week outlined plans to cut as many as 44,000 hourly and salaried jobs in North America and close as many as 16 North American factories by 2012. Ford's advisers, Goldman Sachs Group Inc. and Citigroup Inc., told Ford directors last week that its plans could see it through its current downturn, a person familiar with the discussions said.

A full merger between GM and Ford would encounter obstacles, including potential antitrust concerns. But GM and Ford recently collaborated on a six-speed transmission. GM has left the door open to more alliances in the engine and transmission area, and has also said that it would welcome more participants in a venture with DaimlerChrysler and BMW to develop gas-electric hybrid drive technology for large vehicles.

Sharing engineering or manufacturing of engines and transmissions could save the two giants hundreds of millions of dollars. GM, for example, has three families of four-cylinder engines, and Ford has one, according to data from CSM Worldwide.

Write to Monica Langley at monica.langley*wsj.com, Neal E. Boudett at neal.boudett*wsj.com and Jeffrey McCracken at jeff.mccracken*wsj.com

[oldblue]

They're getting Boeing's president to run the company.

And the Job cuts are in-line with downsizing and an anticipated drastic drop in market share. Ford's trucks are still selling well, but sales are starting to go down... so they're cutting their losses before they get burned.

A Ford-GM merger would be hellishly difficult... and I'd be weary of merging with GM, as their record in mergers is pretty grim.

But seeing how Fiat managed to dick GM out of a billion dollars, hey, good for Ford.

if they're getting boeing's president, are we too expect flying cars in the not too distant future?

[Automahn]

Di na pala matutuloy. I don't know if my analogy is correct but were they trying to do a Hyundai-Kia thing?