GM Considers Chrysler Purchase

Rumors circulated on Friday that General Motors is in preliminary talks with Chrysler over a buyout. If the two were to combine the new GM would own 40% of the American market. However, there is doubt among auto industry analysts about what the merger would actually accomplish.

For starters, both companies are dealing with production overcapacity issues. Job cuts and factory closings seem to be routine these days. It wouldn't make sense for GM, who is cutting jobs, to invest millions of dollars in more employees that they don't need.

Secondly, GM and Chrysler have many competing products, that would have to be tossed out or significantly modified. Potentially redundant models include the Chrysler 300 and the Cadillac CTS, Chevy Malibu and Chrysler Sebring, Chevy Tahoe and Dodge Ram 1500, and Chevy Corvette and Dodge Viper. It should be noted that GM has acknowledged a competition between the Corvette and Viper that enthusiasts have speculated about for some time now.

Thirdly, Chrysler sales are relatively slow. While Chrysler has developed some wildly popular products, such as the 300 and the Charger, mini-vans are still their bread and butter. The problem is, the mini-van market has been shrinking over the last few years due to the rise in popularity of SUV and especially crossover vehicles.

We won't even mention how GM would be acquiring Chrysler's financial arm just after selling of GMAC.

Perhaps the buyout rumors are wrongly based. General Motors spokesperson Tony Cervone said, "We routinely have discussions with other automakers about projects of mutual interest. As a matter of course, we don't comment on those discussions."