A Blue Light Special on Chrysler?

What GM and Chrysler should be discussing
http://tinyurl.com/yp78he

NEW YORK (Fortune) -- Of course, the idea of GM (Charts) buying Chrysler is
preposterous. GM's biggest problem is overcapacity, and Chrysler is full of
things that GM already has too much of: assembly plants, workers, retirees,
car brands, car models, and dealers.

For more than a decade, GM has been trying to slim down; acquiring Chrysler
would only fatten it up again. If that isn't reason enough, consider this:
Try to think of one automotive takeover that has actually worked. There
haven't been any successful ones in modern memory but there have been plenty
of failures: Renault-American Motors; Ford-Jaguar; Studebaker-Packard. These
things always look good on paper but then collapse in the execution.

Chrysler's Valentine's Day massacre
There is a reason why Carlos Ghosn didn't try to merge Renault and Nissan --  
he knew it wasn't worth the effort. The idea that GM would want to buy
Chrysler's sales volume so that it could remain Number One in the world is
hilariously dumb. GM needs to get stronger, not bigger.

But if Chrysler were to be broken up, and all its parts chucked into the
bargain bin, that's a different story. Picking around the pieces, GM could
find some attractive deals.

Here are a few:

The Jeep Brand. Although Chrysler has done its best to dilute the value of
this American icon by building vehicles that are challenged in quality and
functionality, the Jeep name still resonates with buyers. GM hopes that
Hummer can some day challenge it, but in-your-face Hummer represents only a
subset of the whole off-roading culture that Jeep can lay claim to. Taking
on Jeep, and leaving Hummer to the X-games people, would be a smart move.

Diesel engines. Modern diesel engines offer one possible solution to the
alternative energy problem. American automakers have been slow to jump
aboard because they believe that consumers hate them. But diesels are no
longer smoky and smelly, and they provide excellent mileage. Chrysler has
access to Daimler's diesel technology, which is top-drawer. GM is so far
behind the curve that it entered into a disastrous deal with Fiat a couple
of years ago largely to tap into its diesel expertise.

The Dakota midsize pickup. GM dropped the ball when it redesigned its small
pickups, the Chevy Colorado and GMC Canyon, and didn't leave any room in the
engine bay for a six-cylinder engine. The Dakota is a sturdy and successful
truck that has got room to grow if customers start tiring of their
fuel-thirsty V-8 powered fullsize trucks.

10 Cars worth waiting for
The Chrysler Technology Center. The gleaming black structure off I-75 north
of Detroit was one of Lee Iacocca's better ideas. He consolidated all of
Chrysler's far-flung engineering and research facilities under one modern
roof and used the new building as a recruiting tool. GM could do the same
thing. Its engineering complex in Warren, Michigan, with its flat-roofed,
Saarinen-designed buildings made sense back when GM controlled 50% of the
U.S. market. Today it looks dated and ragged around the edges. GM could sell
the land for a golf course or housing development and move into smarter
facilities up the road.

People. Although GM has a solid team of executives, it could cherry-pick
from the Chrysler roster. Would Chrysler COO Eric Ridenour be a worthy
successor to 75-year-old GM vice chairman Bob Lutz? Might not some young
Chrysler designers add flair to GM's already-improving staff? And how about
some of that sharp Chrysler marketing talent to rejuvenate GM's efforts?

So, picking and choosing, it is possible to find some jewels in the Chrysler
wreckage that would benefit GM. But all this feels like arguing about the
number of angels that can fit on the head of a pin. The U.S. auto industry
is in a period of consolidation that is probably only about 50% complete and
new entrants will continue to whittle away at the market share held by
American automakers.

By the end of the decade, cars made in India and China will likely start
arriving in the U.S. and there is no end in sight. If GM expects to survive
this influx, it will have to continue to make better use of its global
resources and not be distracted by ill-conceived mergers.

As for Chrysler, it would be better off staying attached to Daimler. If
anyone knows how to fix Chrysler, it is DaimlerChrysler (Charts) chairman
Dieter Zetsche. And so far, Daimler's investment in Chrysler looks cheap
compared to its other fiascos involving Mitsubishi and Smart -- and has a
lot more upside.

--
"If they pull a knife, you pull a gun. If they put one of yours in the
hospital, you put one of theirs in the morgue."
Sean Connery, "The Untouchables"