DETROIT – Executives of General Motors Corp. and Ford Motor Co. have discussed a possible merger or alliance, the trade journal Automotive News reported Monday. Both companies declined comment.
Automotive News quoted what it said were several people familiar with the talks as saying that discussions involving senior executives began in July and are not taking place now.
The journal quoted one source as saying that GM Chief Financial Officer Fritz Henderson and his Ford counterpart, Don Leclair, discussed a GM-Ford alliance in August.
The report comes as GM and Ford have been slashing their work forces and closing plants in efforts to reverse multibillion dollar losses. Their sales have been hurt by competition from more fuel-efficient models from Asian automakers.
As the two biggest U.S. automakers, any deal would presumably face scrutiny by U.S. antitrust regulators.
This story brings a number of thoughts to mind, pretty much in shotgun fashion.
First, it’s not entirely clear to me how two companies that have been competitors for a century or more would make convivial components of a single company. I’ve seen and lived through any number of large corporate mergers and I’ve never known of an instance of two companies with competitive product lines (and, in the case of Ford and GM, product lines that were designed to be competitive) in which both product lines survived. Generally, the merger took place to allow the dominant component to acquire the smaller company’s customer base or, in some cases, technology, and discontinue the smaller compnay’s product line.
Second, is there synergy between these two companies? I don’t see it. There may be some economies of scale but I think the clash of two different entrenched corporate cultures and bureaucracies will overwhelm any prospective economies. I think that by far the greater likelihood is that the whole would end up smaller than the sum of its part: the combined Ford-GM would lose customers to Toyota or Daimler-Chrysler.
Third, our anti-trust laws were designed for a time in which U. S. companies competed or colluded with each other not against or with foreign competitors which in many cases are directly or indirectly owned by foreign governments. Do they make sense in a global economy?
What impact would the merger have on organized labor? The dealer network? Is such a combine in the interests of the two companies? There’s little doubt that a formula could be worked out such that it was in the interests of top managers. Imagine the salary that the CEO of the combined company could command because of his or her expanded responsibilities! Is such a combine in the interests of the country?