A checkered flag of surrender
After day one of round two of the $34 billion automaker race to viability, a merger between GM and Chrysler is back on the table, along with just about everything else. Lawmakers are looking for that magic headline that will make the bailout make sense to taxpayers. Senate Banking Committee Chairman Sen. Chris Dodd noted that nothing focuses attention on solutions like impending death.
So far, prospects of an auto czar doling out big chunks of money or a federally mandated merger haven’t convinced the Treasury to use its mighty TARP chest to fund salvage efforts for the auto industry. The Fed could make a loan to automakers in some circumstances. It is expected to send a letter to Dodd today explaining how it must obtain sufficient collateral under law to make any emergency loans, a source familiar with the letter told Reuters.
Motor Trend’s blog argues that a shot-gun wedding would just allow GM to replenish a brand line-up that it has just shrunk to make itself more nimble. In his testimony, GM CEO Rick Wagoner noted that earlier merger talks with Chrysler failed because GM did not have the money.
Chrysler CEO Robert Nardelli said his job would likely be the first to go in a merger with GM, but “I would do it” if it would save Chrysler and its workers. Such self-sacrifice is about as heartwarming as the auto execs taking hybrids to Washington instead of jets. Nardelli has already said he is willing to have his salary cut to $1, which is where it is already. His severance package from his days at Home Depot will ensure that he can always afford to buy a car.
But if lawmakers are hoping a merger will somehow resuscitate the industry, they may want to think again. United Auto Workers President Ron Gettelfinger questioned claims of cost savings from a merger and said such a deal would bring “unbelievable” job losses. No congressional action on aid is expected before next week — and perhaps not even then — despite dire warnings that GM could collapse by year-end without aid.
So what the industry hopes is the final lap around Congress begins in a few hours, right back where it started. Meanwhile, the rest of the world’s auto industry is choking. Global sales at BMW, the world’s top premium carmaker, plunged by 25 percent in November, and Honda backed out of Formula One racing.
Deals of the day:
* China’s new anti-monopoly authorities were due to begin their review of BHP Billiton’s bid for Rio Tinto on the very day BHP scrapped its bid, a top anti-monopoly official said.
* Bloomsbury Publishing has acquired John Wisden & Co, the publisher of Wisden Cricketers’ Almanack, in a move to boost its presence in reference and sport publishing, the company said.
* A decision on the takeover of the Luxembourg arm of troubled Icelandic bank Kaupthing , will be postponed for technical reasons, a spokesman for Belgian Prime Minister Yves Leterme said.
* Oil and gas explorer White Nile Ltd said it planned to shift its focus and invest in agricultural sector in Africa as its operations in Southern Sudan would not begin before January 2011 when the region holds a referendum on total independence.
* Australian coal miner Felix Resources is in talks about a possible takeover by China’s third-biggest miner, Yanzhou Coal Mining Co Ltd, a source familiar with the process told Reuters.
* South Korea’s Doosan Corp is considering selling its spirits-making division after receiving “attractive” offers for the business, the group said, in a deal reportedly worth up to $500 million.
* E.ON expects to start the sale of its German power network early next year and could merge it with that of rival Vattenfall, E.ON Chief Executive Wulf Bernotat told a German newspaper.
* Tea producer Mcleod Russel India Ltd said the Reserve Bank of India has allowed foreign funds to buy shares up to 40 percent of the company’s paid-up capital from the earlier level of 24 percent.
* Two component-making units of LG Electronics called off a merger plan, citing the heavy cost to buy out minority shareholders amid deteriorating financial conditions.
* South Korea’s Hynix Semiconductor is interested in Infineon’s loss-making chipmaker Qimonda , a senior German politician was quoted as saying, but Hynix denied it.