Thursday, April 16, 2009

WELD GM & CHRYSLER TOGETHER? Seventh in a Series

An article posted on NY Times online makes the case for merging GM and Chrysler, not Chrysler and Fiat. The article makes the case that the two US auto manufacturers should be merged together. Take a look at the article to see the authors' case for the merger.

After you read the article, please note that in the troubled company world, putting two financially sick companies together never makes one healthy company. People often think it is a good idea. My experience over the past 25 years is that it is not a good idea. It looks good on paper, but it doesn't work in real life.

It is hard enough to restructure the operations of one broken company (a technical term). It is a large task to merge a broken company into a healthy company. Restructuring two broken companies at the same time and merging them is a recipe for disaster.

The managements have to be rationalized. The product lines have to be pruned and integrated. All of the manufacturing plants and marketing and administrative locations have to be dealt with in a logical manner. The work forces have to be combined and pruned. The dealers have to be greatly reduced. The supplies and the vendors have to be addressed by deciding which have to be cut and which have to be renegotiated. The UAW contracts have to be coordinated. The retiree liabilities have to be addressed. The cultures and work processes have to be merged and managed. And so on and so on.

So, like I said, putting two sick chickens together does not make one healthy chicken no matter what the Excel spreadsheet says.

Cheers, Mike

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