GM, Ford not threatened by Daimler-Chrysler merger
By David Lawder
DETROIT, May 8 (Reuters) - As executives at General Motors Corp.
(GM-news) and Ford Motor Co. (F - news) got used to the pronunciation of ''DaimlerChrysler'' on Friday, they said the auto mega-merger doesn't immediately threaten them.
Although the marriage of Chrysler Corp. (C - news) and Daimler-Benz
AG (DAIG.F) strengthens each company's volume, product lines, geographic reach and investment resources, No. 1 GM and No. 2 Ford remain far larger and richer companies.
DaimlerChrysler, forged in a merger valued at about $41 billion based
on Friday's stock trading, will remain the world's fifth largest
vehicle maker, behind GM, Ford, Toyota Motor Corp. (7203.T) and
Volkswagen AG (VOWG.F).
Ford spokesman Mel Stephens said the automaker sees no reason to seek
out any new automotive partners to combat the DaimlerChrysler threat.
''It shows that this is a global business and volume is important, but
we like our position,'' Stephens said. ''When it's all said and done,
we wouldn't trade places with anybody.''
Ford already has a major presence in Europe, with extensive operations
in Germany and Britain, including the expanding Jaguar luxury car
brand. It recently opened a plant in Thailand and is investing heavily
in India and Brazil.
In Leipzig, Germany, on Friday, GM International Operations chief
Louis Hughes said the Daimler-Chrysler merger looked like a good deal
for shareholders, but he played down the threat posed by the new
company.
''We have been the biggest player on the market for a long time,''
Hughes told Reuters at an American Chamber of Commerce meeting. ''This
means there is now one very large competitor in the industry, albeit
not across the broad spectrum of products.''
Hughes also said it was ''too early to predict whether there will now
be a wave of consolidation in the industry or not.''
Analysts also said GM and Ford do not need to immediately change their
strategy to compete with DaimlerChrysler.
''We think they are not too badly threatened,'' said Nick Colas, the
U.S. auto analyst for CS First Boston. ''This does not materially
change their prospects.''
Ford had a staggering $21.3 billion in cash in its automotive
operations at the end of the first quarter and GM had $13.6 billion.
Chrysler had $7.85 billion, but its war chest for automotive uses will
not match that of Ford and GM after the Daimler deal, Colas said.
Ford and GM also can still spread their costs over larger vehicle
volumes and have more overlapping vehicle platforms than
DaimlerChrysler will -- offering them more opportunities to
consolidate operations and cut costs.
Chrysler Chairman Robert Eaton and Daimler Chief Executive Juergen
Schrempp went to great lengths at Thursday's news conference to
emphasize that the union will not lead to job cuts or facility
closings. They predicted cost savings of $1.4 billion in 1999, largely
from purchasing and research savings.
GM plans to slash $4 billion from costs this year, and Ford is widely
expected to beat its $1 billion cost-cutting target this year after
reducing costs by $3 billion.
One area where the new DaimlerChrysler could challenge Ford and
Chrysler, analysts said, is Asia, where all of them are just starting
out.
Colas, whose firm advised Chrysler in the transaction, said the deal
will allow the combined firm to invest more in new Asian operations
than either company could have invested alone.
Each company at best had $1 billion to $2 billion annually to spend on
Asian plants.
''They were effectively betting the ranch every time they did so,''
Colas said. ''The combined company does have the critical mass to make
very chunky, very aggressive investments in emerging markets.''
Vice President Al Gore, who gave a speech in Detroit on Friday,
declined to say whether he thought the proposed merger would pass
muster with federal antitrust officials. But he praised the efforts of
the American auto industry over the past several years, saying it
''has never ever been stronger.''
Gore said he was an early supporter of the government's 1980 bailout
of Chrysler, which saved the company from bankruptcy.
''Just imagine how things would be different if that had not been done
back then,'' he added.
Gore began his speech to Detroit business leaders by joking, ''Is
there anything big in the news?'' |
