Inside GM's Plans for Chrysler

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One way GM accelerated that strategy was by eliminating vehicles that were basically the same but sold under both the Buick and Pontiac names. After GM reduced the number of vehicles each brand sells, some dealers decided on their own to get out.

That reveals another headache for any company buying Chrysler. While the company has pushed dealers to sell to others so that all three brands are under one roof, Chrysler has simultaneously added rebadged or similar cars to each of its brands. That enables dealers who sell just one or two of the brands to soldier on without adding other Chrysler brands to their offering because they already have a full line of vehicles to sell. Chrysler brand dealers now sell the Aspen sport-utility vehicle, which is a rebadged Dodge Durango. Dodge dealers sell the Nitro, which is similar to the Jeep Liberty. The Dodge Caliber and Jeep Compass are also similar models in consumers' eyes.

Fewer Platforms, Fewer Models

GM thinks it could pare down Chrysler's lineup by eliminating redundant cars. At the same time, GM considers Chrysler's minivans a strong product line. And one executive remarked that Jeep has the highest loyalty rate among Chrysler's brands. GM could use the Wrangler platform to make a Hummer H4, a concept car that GM wants to build but hasn't because the company doesn't have a platform.

Chrysler's midsize Sebring and Avenger sedans could be built using GM's global midsize car platform on which the Opel Vectra, Chevrolet Malibu, and Saturn Aura are now based. That would give Chrysler something it lacks, something Daimler's Mercedes-Benz division could never give it: global sales volume and purchasing power.

There are many benefits, according to GM insiders. But big problems, too. In addition to union retiree costs, Chrysler's sales strategy of discounting cars and selling cheap vehicles to rental fleets has flooded the market with cars. Some GM executives think the worst is yet to come. Chrysler will have to keep pulling back production while dealers sell through the excess inventory. "They have really oversupplied the market," says one GM insider. "The cost of that is still ahead of them."

In other words, GM has its eyes open to the pitfalls of buying Chrysler. "I can see GM looking at getting Chrysler at a price you can't refuse," Cole says. Daimler may even be willing to give up Chrysler at such a price. But getting the union and dealers to make it an easy acquisition to swallow may be much harder to do.

Welch is BusinessWeek's Detroit bureau chief.