Many question what would be cut GM, Chrysler talks have workers, dealers worried
By Katie Merx . Business Writer Detroit Free Press October 12, 2008
American autoworkers and car dealers were concerned Saturday about what would be cut -- and whose jobs would be lost -- if talks between General Motors Corp. and Chrysler LLC result in one less U.S. automaker.
News of merger talks between the two metro Detroit-based automakers became public Friday night, the same day that GM -- the world's largest automaker -- waved off speculation that the current global financial crisis could drive it into bankruptcy.
Workers and dealers said they were shocked to wake up to the news Saturday and believe the talks are serious.
"I think it's going to happen," said Ed Pietrowski, an hourly worker at GM's Bowling Green, Ky., assembly plant. "For the last year, since this economic crisis hit, they've been looking for any way they can cut costs."
Joe Serra, president and owner of Grand Blanc-based Serra Automotive, said a GM-Chrysler combination would likely allow Chrysler's majority owner, Cerberus, to get out of the car business and a newly combined GM-Chrysler entity to sell more cars with lower overhead costs.
"GM must see some potential economy of scale in sharing vehicle platforms, corporate operations, engineering and dealer bodies," Serra said. "There would be some big decisions they'd have to make."
Such economies of scale typically mean job cuts and consolidation. That makes Eddie Gordish, an hourly worker at Chrysler's Jefferson North Assembly Plant, and his coworkers feel "squeamish" about the merger talks.
"It's scary, with GM being so poor right now," Gordish said. "Right now, at least we have Cerberus to back us financially. A big concern is who and what they would get rid of."
And in New Britain, Conn., Ken Papa, a Chrysler, Dodge and Jeep dealer, said he doesn't like the idea of a merger.
"We're trying to analyze where the economies of scale fit in that make sense for these two companies to come together," Papa said. "It would have to be a complete rethinking."
In addition to redundant products and the plants that make them, he said, there's another problem that strikes close to his heart: Both automakers already have more dealers than they need.
Combining the companies, he said, would likely intensify efforts to combine and eliminate dealerships, and it's unclear how a merged automaker would go about doing that.
Jim Hall, managing director of 2953 Analytics in Birmingham, said taking on both dealer networks would be the biggest impediment to a merger, since there is too much overlap.
"It would take years and billions of dollars to deal with the dealer overlap," Hall said. "In a bad business environment, however, dealers are going to start dropping anyway."
An auto executive familiar with the merger talks said the dealer overlap isn't as much of a problem as people expect because the savings gained from combining corporate and manufacturing functions could amount to billions.
http://www.freep.com/article/20081012/BUSINESS01/810120396/1210/BUSINESS
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