Magazine

A GM-Ford Marriage


It's been discussed

How desperate are things in Detroit? At a recent management meeting, a senior General Motors (GM) executive floated the idea of approaching Ford Motor (F) about a merger, BusinessWeek has learned.

The idea was shot down quickly, says someone familiar with the discussions. But it's telling that anyone in the C-suite even brought it up. Ford and GM are burning cash and weighing their options if auto sales continue to free-fall. "I don't think a merger is likely," says David E. Cole, chairman of the Center for Automotive Research. "But you'll see a lot of options considered if they think bigger problems will come [along]."

A GM-Ford marriage has some merit. Merging the massive overhead of each company would save a combined entity billions. Their total cash hoard of nearly $50 billion could help them survive what most analysts expect to be a year or two of weak sales.

But when the idea came up, most in the room waved it away, saying a hookup would be a huge distraction at a time management needs to focus on a turnaround. Plus, a deal would double many problems, including an excess of plants that build gas guzzlers, brands that need repair, and losses in North America.

Putting such a deal together also would be incredibly complex. There are shareholders on both sides—including the Ford family, which has a major stake—to be considered. Billionaire Kirk Kerkorian is now Ford's largest independent owner. The union would want a say in what happens to all those factory workers. And then, what would you call the company? General Ford Motors just doesn't sing.

Welch is BusinessWeek's Detroit bureau chief.

Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus