A drastically reduced number of Chrysler vehicles, plants and dealers could result from a merger of the automaker with General Motors Corp., a deal that has about a 50-50 chance of going through, possibly by the end of October, auto analysts say.
Reports abounded last week that Cerberus Capital Management LP was continuing serious talks with General Motors Corp. on the sale of all or parts of its Chrysler LLC subsidiary to GM.
A major player in the deal could be JPMorgan Chase & Co., one of the largest holders of Chrysler bank debt and one of GM's key lenders, The Wall Street Journal said.
There were even suggestions that France's Renault S.A. might be interested in a piece of Chrysler — the Jeep brand that Renault sold to the U.S. automaker 21 years ago.
Renault officials denied that Friday evening, though. "There are no discussions between Renault and Chrysler," Renault spokeswoman Frederique Le Greves said in an e-mail from France.
Speculation continues over how the U.S. car manufacturing business could be rearranged, though, in an environment of shrinking car sales, difficult financing and high debt. Possibilities range from a complete takeover of Chrysler by GM to the breakup of Chrysler into smaller parts, with several buyers swooping in for pieces, analysts say.
There's still a chance that Cerberus, which bought an 80.1 percent stake in Chrysler from Germany's Daimler-Benz in August 2007, could decide to continue running Chrysler as an independent automaker. (Daimler still holds a 19.9 percent share of Chrysler, although Cerberus is in negotiations to buy the rest of the company.)
But what happens if Chrysler is carved up or sold outright?
With a breakup of Chrysler, GM could be expected to go after the automaker's highly successful minivan business, along with a truck plant in Mexico and perhaps even the Dodge Ram pickup as an addition to GM's already profitable line of Chevrolet Silverado and GMC Sierra pickups, analysts say.
Strategically, a complete merger between Chrysler and GM "probably doesn't make much sense," said Jeremy Anwyl, a longtime auto-industry analyst who now serves as chief executive officer of the auto consumer Web site Edmunds.com.
But banks holding GM's debt might push such a merger, Anwyl said.
"The pressure is coming from the bankers, because they obviously are thinking about getting the debt repaid," he said.
Chrysler has about $10 billion in cash on hand, which potentially could help GM get through a possible cash crunch during 2009. GM lost $1.6 billion last year and posted a $510 million loss in its first quarter this year. The company is going through about $1 billion of its cash each month.
Cash, credit unit in playUnder a potential deal widely reported by the financial media, Cerberus would trade Chrysler and $3 billion in cash for the remaining 49 percent stake that GM still holds in the GMAC finance unit. Cerberus bought the other 51 percent of GMAC from GM last year.
"There would be some benefits from a complete consolidation, such as allowing the combined company to take some of its capacity offline," Anwyl said. "It could result in the shutdown of some dealers and plants, and maybe even some brands. But that would also mean ultimately giving up market share as well, and that doesn't seem to be a good strategic move."
GM's real interest in Chrysler might lie with the Jeep sport utility vehicle brand, as well as the minivan line, which includes the Chrysler Town & Country and Dodge Grand Caravan.
GM has no minivans in its current lineup, although it does sell a line of crossover utility vehicles, including the new Chevrolet Traverse made in Spring Hill, that compete against minivans.
"Some of this makes sense, but not all of it," auto analyst George Magliano with Global Insight said of a possible Chrysler-GM merger.
"Initially when Chrysler was put into play, GM wanted the Jeep brand and the minivans," he said. "Beyond that, the other stuff probably would be up for grabs. In an ideal world, GM would keep Jeep and the minivans, and sell off the rest."
With a breakup of Chrysler, the other potentially valuable pieces that could find separate buyers include its Mopar parts operation and Chrysler Financial, its captive finance unit.
In almost any merger or breakup scenario, Dodge and Chrysler's midsize cars and truck-based sport utility vehicles would be eliminated, analysts said. That includes the Dodge Avenger and Chrysler Sebring sedans, as well as the Dodge Durango and Chrysler Aspen SUVs.
GM has a strong line of midsize sedans, led by the award-winning Chevrolet Malibu and Saturn Aura. And it has a popular line of SUVs, including the Chevy Tahoe and Suburban, GMC Yukon and Cadillac Escalade.
Also in doubt would be the Dodge Ram pickup line, Anwyl said. The Ram — with just a 20 percent market share — is a relatively small player.
GM already has the industry's best-selling full-size pickups — the Chevrolet Silverado and GMC Sierra — whose combined sales totaled nearly 1 million units last year, although sales are off significantly this year.
If GM bought Chrysler, "would you stop making Ram and hope those buyers like the Silverado?" Anwyl said. "Or would you try to differentiate them enough in the marketplace to keep from losing share? Throw another vehicle into the mix, and it gets complicated."
What would GM toss?GM also might have to do away with some brands, as well, analysts said. Chrysler is considered to be the most vulnerable, because Dodge and Jeep are more popular.
But some GM brands could be on a hit list, too. During GM's recent financial upheaval, some critics suggested axing the Pontiac, Buick and Saturn lines, leaving only Chevrolet, GMC and Cadillac in the GM fold. GM already has the Hummer SUV brand on the auction block.
Jeep could fill the void left by Hummer, several analysts said.
While Hummer has just premium-priced vehicles in its lineup, both of which are regarded as gas-guzzlers, Jeep has a full range of sport utilities, with prices starting around a modest $16,000.
It also has the iconic Wrangler off-road vehicle that has been the key Jeep product since the brand's inception after the end of World War II.
"Jeep is strong," Anwyl said, even with this past year's downturn in SUV sales. "It's something that GM or any other automaker might want."
The most economical Jeeps have fuel economy similar to that of some compact cars. The five-passenger Patriot, for instance, has EPA ratings as high as 23 miles per gallon in the city and 28 on the highway.
For Renault, the acquisition of Jeep would allow it to slip back into the U.S. market, which it abandoned completely with the sale of Jeep and American Motors. The company has said in recent years that it would like to return to the United States. But startup costs have been prohibitive, considering that without an alliance with an automaker already here, Renault would have to establish an entirely new dealer network.
With the purchase of Jeep, it would have an established dealer network that could also be used to sell some of Renault's fuel-efficient small cars that are popular in Europe.
Renault's chief executive is Carlos Ghosn, who also is the CEO of Japan's Nissan. Nissan North America is based in Franklin.
Renault holds a 44.3 percent stake in Nissan, while Nissan owns 15 percent of Renault. The French government also is a Renault stockholder.
In a recent memoir, former Renault Chairman Louis Schweitzer said that he regretted selling Jeep and AMC to Chrysler. At the time, though, the two brands were languishing.
"Renault buying Jeep could make sense," Magliano said. "It would be a quick way to get back into the U.S. market."
Ghosn made it clear during a visit to Nashville in July that Nissan wasn't interested in acquiring Chrysler. But the two companies do have agreements to manufacture vehicles for each other over the next few years, and Nissan is not expecting those deals to be affected by any changes in Chrysler ownership.
"As you know, we have three recently announced vehicle agreements in place with Chrysler —two small cars and a truck," Nissan spokesman Fred Standish said.
"Other than that, we're just keeping the lines of communication open."
Nissan will build the two cars for Chrysler, and Chrysler will provide Nissan with a full-size pickup.
The cash that Chrysler would bring to GM might make an all-in-one sale the best option for Cerberus and GM, Magliano said, although he believes it's more likely that Chrysler would be broken up.
But either way, Cerberus probably wants to get out of the auto business, he said. "The timing for them just turned out to be wrong," he said.
"When the deal was made for Chrysler last year, I don't think anybody counted on the credit crisis and the market going this way. It's been tough for Cerberus."
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