Big 2 merger? Absurd, but...

With Ford, GM, never say never

September 19, 2006

In a clear sign of how squirrelly the watercooler chatter in Detroit has become, the wires and the airwaves were atwitter Monday at the prospect of a mega-merger or alliance between Ford Motor Co. and General Motors Corp.

Never mind that U.S. antitrust lawyers would be stomping all over any combination of consequence between GM and Ford.

Never mind that the product lines of the two automakers are not complementary. Each is strong where the other is strong (big trucks) and weak where the other is weak (minivans, many cars).

Never mind that GM and Ford already work together on transmissions, safety issues and other things.

None of these never-minds stopped the newswires, or Detroit's radio and TV stations, from breathlessly repeating the sketchy nine-paragraph report in the trade weekly Automotive News. The publication said under the tantalizing headline "The Ultimate Alliance: GM and Ford" that officials of the two firms had talked last month about a possible alliance.

GM and Ford officials on Monday wouldn't characterize the nature of the discussions, except to say the companies talk to each other routinely about various issues. They insisted, as of now, the companies are not holding talks.

But what about tomorrow? Or a week from Saturday?

"It's wilder than the GM-Renault-Nissan thing, and that's pretty wild," University of Michigan business professor Gerald Meyers said, referring to ongoing discussions involving GM, Renault SA of France and Nissan Motor Co. of Japan about a possible alliance among the three. Maverick GM shareholder Kirk Kerkorian started pushing GM in late June to explore joining the existing Renault-Nissan alliance.

Meyers, former chief executive officer of American Motors Corp., has some history with such matters. He merged AMC into Renault in a series of transactions beginning in 1979.

Meyers and other industry observers said a GM-Ford combination could conceivably cut costs by reducing the number of vehicle platforms and jettisoning thousands more engineers than the two shrinking companies already have shed in recent years. And a fused Ford-GM could presumably bludgeon its poor suppliers for even lower parts prices and squeeze the ever-weaker UAW for more wage and benefit concessions.

But to what end? Survival, perhaps, if both GM and Ford see no other alternatives. It's hard, however, to imagine these two companies, with their very different cultures and history of cutthroat competition, would get hitched unless at gunpoint.

Why am I even writing about this? Why did other news outlets fly into a dither about it?

Because all kinds of conventional wisdom about Detroit, about GM, about Ford, has exploded in recent years.

Think about job security. Comfortable retirements. Guaranteed pensions. Great retiree health care benefits. Those were viewed as immutable entitlements by folks who hired on at GM, Ford and Chrysler in the 1950s and 1960s. No more.

Could we have imagined back then that GM and Ford would be struggling for survival in a sea of junk-rated debt?

Nothing, it seems, is beyond the pale anymore. The United States ascended to unrivaled world economic supremacy after defeating Germany and Japan in World War II, yet today, a mere 60 years later, Chrysler is owned by Germany's DaimlerChrysler AG, and Ford has been surpassed in a flash by Japan's Toyota Motor Corp. as the world's No. 2 seller of cars and trucks.

Are GM and Ford on the verge of a merge? Highly unlikely, now or next week or next month. But we've seen way too much upheaval hereabouts to say never.

Contact TOM WALSH at 313-223-4430 or twalsh@freepress.com.