GM-Chrysler Merger and Hybrid Cars

On Friday, media organizations started running stories about a possible merger of General Motors and Chrysler. We wondered what such a merger would mean for the future of domestic hybrid and plug-in cars—so we asked a panel of auto industry analysts. Here’s what they had to say.

How much can Detroit’s financial woes be blamed on a reliance on gas-guzzlers and dragging heels on hybrids?

“More than half. I predicted $11 billion in losses per year from having wrong products.”
- Walter McManus, auto economist, University of Michigan

“A lot. In 2005, GM began seeing its first quarterly losses, and the company’s response was to ‘pull forward’ the launch of its new full-sized SUVs. Since then, full-sized light-trucks have become less relevant in the auto market. GM’s response should have been to figure out how to offer a set of fuel-efficient vehicles that consumers wanted to buy and that would make money for the company.”
- Reid Heffner, associate, transportation practice, Booz Allen Hamilton

“The bigger issue that adds to their burden is the enormous health care and retirement costs which they own. This indirectly impedes them from quicker investments into new product ideas, including alternative fuels and powertrain technology.”
- Lonnie Miller, director, industry analysis, R.L. Polk & Co.

“Detroit’s over reliance and gas guzzlers is perhaps best viewed as a ‘straw that broke the camel’s back’ when the camel was already weakened by many other financial factors unrelated to fuel economy. And now the crippled camel is getting trampled by an elephant in the form of a car market and world economy that is in major recession as far as auto sales are concerned.”
- John DeCicco, senior fellow, Environmental Defense

Could a merger of Detroit companies mean sharing resources to build a more competitive domestic program for hybrids and plug-in vehicles?

“I don’t think mergers between automakers are the answer for faster hybrid-electric and plug-in hybrid electric vehicle development. Now, if one (or more) of the Detroit Three starts shopping for battery companies and brings the development of critical hybrid components in-house, then things could get really interesting. That would be a signal that they are serious about electric-drive vehicles.”
- Reid Heffner

“A merger of Detroit companies will certainly offer intellectual capital for alternative powertrain development efforts, but you’d hope they wouldn’t be thwarted by “merger red tape” should an actual marriage occur. In 2006, GM, Daimler and BMW opened a Hybrid Development Center in Troy, Michigan. While the collaborative focus was developing a two-mode hybrid system, it’s unclear how aggressive their research objectives were since we’ve not heard much about subsequent efforts.”
- Lonnie Miller

“I can’t see how it would help. Mergers of failing companies produce one big failing company.”
- Walter McManus

Asian car companies already own more than 85 percent of hybrid market (and just about all of global hybrid battery production). Are Detroit’s woes all that relevant to growth of hybrid market?

“No, I don’t think Detroit’s woes are really that relevant to the development of the hybrid market per se. They will need to offer more hybrid products just to stay competitive as that market unfolds. However, they’ve not been leading it and if they continue to lag, others will be there with hybrid products, such as Hyundai, Nissan and VW, and before long Chinese and Indian automakers.”
- John DeCicco

“John Q. Public still has a lot of education coming their way from the industry and that is where it’s anybody’s guess to see who dominates in alternative powertrain, including hybrid, technologies. The real measure is who sells the most for a profit.”
- Lonnie Miller

“I wouldn’t count Detroit out yet. So far, GM and Ford have been leaders in the development of plug-in hybrids. I guess the question that remains is how big a bet Detroit is willing to make on advanced vehicles. If they bet big, they could lead the transformation of an industry, and make it happen quickly. Given their financial condition, they may have no choice but to place some big bets.”
- Reid Heffner


  • STEVEN PELT

    Ever Heard Of Cobasys? Us Hybrid Battery Company Jv Energy Conversion Devices And Chevron ? Inventors / Patent Holders Us Company In Michigan
    Hello Buy It, GM / Chrysler

  • Samie

    Cobasys sounds like a dirty word if you ask me. Sharing technology along w/ the same suppler of batteries with other competitors was a huge mistake. It either showed a lack of predicting future trends, or maybe lack of real competitive innovation or loaded with other special interests to dilute the market. The two mode tech has some advantages but when applied to the market of Prius cars it lacks the needed mpgs that consumers have demanded from full hybrid technology. GM to my knowledge as not adapted to the use of full hybrid technology which some call GM’s hybrids inferior to many of the other automakers.

    The fact is even Wagner still talks about “sharing technology” that was in an interview a few months ago concerning the Chevy Volt. I don’t really get that position in less you want to try to slow the amount of innovation of some of your competitors. Silly to me in that the U.S. is one of the top hybrid markets in the world. It is somewhat scary that GM is moving on with the E85 program to the delight of the Chevrons of the world. Clearly not something that will address future needs of consumers. Sounds good but that is a waste of money and is a short term idea that has no real long term solutions the same ideas may have been GM’s downfall with the development of the hybrid. The Volt on the other hand may give GM the upper hand in this market but clearly price, battery production, and delivery needs to meet for most consumers in the next 10 years. Uphill battle and bad track record but we will see it they actually take the lead on this one and ride out the two-mode system until the Volt gets here.

  • Marty

    Too little to late. Lutz & people like him have already dug the grave for tens of thousands of workers. Look next for China to buy the dealership network in order to sell cars built in China. GM management leaves with money, workers go unemployed & the US loses another manufacturing giant. Oh, as for Chrysler, they will dismantle & run & Ford, simply merge into a Korean company.. American companies simply don’t care about the future, only todays money for themselves. Thanks to the US government for allowing the above to happen, good work paying all the money to companies that off shore work & workers for more profit & campaign contributions.

  • kerry bradshaw

    I love the brainless logic that claims that US automaker’s problems are anything other than exorbitant labor costs, compliments of the price-fixing members of the UAW. Those large cars that are blamed for current woes were the only reason these companies are still here. If they had been building small cars that nobody wanted for the past 10 years, there would be no US automakers to talk about today. Why don’t you folks face reality and stop trying to shift the blame. If you haven’t got the guts to tell the truth, then how about shutting up? Anyone want to hire one of theose unskilled, ineffiicnet UAW workers? Will only cost you $135 per hour. End of case. End of discussion. Jeeez, what a bunch of weenies.

  • jerry cherry

    So far, I haven’t heard any mention of the main advantage of a GM Chrysler merger. Apparently no one here wants to mention labor costs. The only antidote to a monopolistic labor union is a monopolistic labor union employer. That’s pretty much what GM and Chrysler would be together. If Ford would come in, as they were thinking of doing a few months ago, then the days of UAW
    extortion would be ended. The gravy train and consumer gouging
    union members would be gone forever. I’m astounded that no one has yet even been aware of this major component of the
    proposed merger. The “financial wise guys” have been talking
    elimination of duplicate design studios, etc. Those costs are pure chicken feed when compared to the costs savings that could be achieved from requiring the UAW to compete for the first time in 80 years.

  • Boom Boom

    Kerry’s dad must have been killed in a hit and run by a union truck… Somebody’s got issues.

    Labor costs are surely part of the Big Three’s problem, but I’m not sure how merging two union companies is going to create competition among the union jobs.

    And to blame unions of all for the missteps that the Big Three have made over the last 20 years isn’t gutsy, it is just short sighted. Management of the Big Three has done plenty wrong. (Starting with not having a plan for when the gas-guzzlers stopped being popular.)

  • ian

    Big Three, in collusion with Big Oil, made a pretty profit by convincing American drivers for years that SUVs are “safer”, despite numerous studies and reports that proved otherwise. And of course the gullible American public merrily swallowed it. Bigger’s better. Gas was cheap, so what’s the problem?

    Those of us who have enough common sense to steer clear of those monstrosity-on-wheels can only shake our heads and say, “I told you so!”

  • GM lawyer

    Its about the economy stupid , the Big 3 will be bailed out because they are responsible for many jobs in Us particularly the midwest ……the japanese will invest in Chrysler before GM merges with anybody

  • bill cosworth

    People here are a little nuts. People like this live in a vacuum. With all the American computer companies like apple, Microsoft and intell making chips and boosting the CA economy I fall to see where CA people get there anti American industry from when they are in fact themselves American manufactures.

    GM is the largest American company in the USA and employees more workers than any US company and purchases more parts from us suppliers than any auto company.

    They mean well and one person who doesn’t even work for GM anymore gave the order to recall the ev1.

    So one person is not an entire company of smart young bright engineers who want to make a difference and bring the company into the future.

    GM also sells more cars than toyota.

    Toyota was down 32 percent last month.

    GM down 15%.

    So let the press make a mess out of GM if they want they are an easy target.

    I think the next target should be toyota. They have caused a lot more harm than good to our economy.

    G

  • Gale Helseso

    I looked up some figures too. GM and Ford are now producing better cars than Toyota and Honda.

    Something to think about that americans are now buying more foreign cars that are lower quality than there own cars.

  • Knarf

    “I love the brainless logic that claims that US automaker’s problems are anything other than exorbitant labor costs, compliments of the price-fixing members of the UAW. Those large cars that are blamed for current woes were the only reason these companies are still here. If they had been building small cars that nobody wanted for the past 10 years, there would be no US automakers to talk about today. Why don’t you folks face reality and stop trying to shift the blame. If you haven’t got the guts to tell the truth, then how about shutting up? Anyone want to hire one of theose unskilled, ineffiicnet UAW workers? Will only cost you $135 per hour. End of case. End of discussion. Jeeez, what a bunch of weenies.”

    This is actually hugely accurate. The rest of you need to shut up and read up. These burdens absorb our US automaker’s profits (have for many years) that could be sunk into alt fuel work. These burdens are well documented and any of the ignorant masses can research it.

    Toyota has enjoyed tremendous government support and hence could stand to lose money on the Prius for all these years that it has. At its heart, Toyota is a truck company too who also enjoyed SUV profit margins. If it’s making a profit on hybrids, it’s only recently. Without that kind of government assistance to big business we vilify (and rightfully IMO), our business are at a disadvantage. On the upside, despite these set backs they are still here which indicates they are solid profit based business that can justify their existence in a free market.

    Anyway, stop dissing US automakers and start getting pissed at UAW workers who get paid $80,000 to keep coffee pots full. These assemblers get paid more than the engineers that design the vehicles. Ridiculous.

  • Knarf

    Ian, you are ignorant.

    Take a look at the auto industry Vs. gas prices and they are inversely related. The higher the fuel prices, the less expendable income we have, the less likely we are to purchase new vehicles (and other goods and services).

    Again, trends that are well documented for those who would rather educate themselves than anonymously declare their idiocy over the ‘net.

    Ian here needs to believe there is some ridiculous conspiracy so that he can shed blame for the individual’s choice to purchase a large inefficient vehicle from an automaker while that as well as other automakers made efficient alternatives at a lower cost.

  • Collin Burnell

    I think a GM / Chrysler merger is insane. When this behemoth crashes it will send the planet out of orbit !!!

    Please say it isn’t so!!!!

  • Shines

    Let’s see… GM Chrysler merger – I doubt it.
    GMs woes because of UAW labor being too expensive – partly true. This is still the greatest nation on earth and our auto companies should be able to pay our laborers better than other countries especially if we had maintained our auto building technology lead. I think it (UAW wages) has gotten out of hand a bit, but that cannot be blamed for all of the US auto companies’ woes.

    Let’s not get confused between initial quality and reliability. Sure some of the newer models from Ford and GM have better initial quality than Toyota or Honda, but when you compare the same cars after say 50k miles the Toyotas and Hondas hold up much better.
    American cars have improved a lot and there are models that I would buy (the last new car I bought for myself was a Dodge Dakota – it was a good truck). Still the used 2001 Toyota Camry I bought which now has over 100000 miles on it is the best car I’ve ever owned. It is too bad if you believe Toyota got more government tax breaks than US auto makers. The US has to compete in the world economy.
    I believe US auto makers will continue to succeed. But I’ll wait for their reliability improve a bit more (it must and will!).

  • ian

    Knarf, no need to be condescending. If you don’t believe what I wrote about SUVs being touted by Big Three as “safer”, all you have to do is do a search on this topic. There’s a wonderful tool on the Internet called Google. Use it sometimes. You’ll be amazed at what you can learn (if you know how to, that is.)

  • Samie

    Can someone say cranky. Fight as you will but the fact is GM has and will have labor issues that is a fact but also consider the lack of innovation for their hybrid program. My focus was on GM’s and using the same battery maker as others which turned out to be crazy, so much for competition. Any car manufacture will have labor problems but GM and others where living in the 70′s up to a few years ago. Someone should check but last I thought Walmart was the largest employer in the U.S. To say its all labor or all lack of adaptation is silly there are legitimate arguments that both indeed have lead to a decrease in revenue and really bad stock prices. Merger with Chrysler? I really don’t see how that benefits GM.

  • shrlz

    Actually, the Federal Government is the largest employer in the US, with more than 2.7 million workers. Walmart is second, with just over 1.1 million. GM employs about 266,000, according to their website. (Found all this using Google.)

  • Boom Boom

    Hurray for Shrlz for actually doing some research rather than just insulting every one else on the site. Knarf, Gale, Mr. Cosworth might take a note from the individual without vowels. Just because you say something more adamantly or add an insult on the end does not make it any more believable. Try adding a few actual numbers to your rants.

  • drich

    I am tired of all of the posts blaming the workers. If these assertions were true, then how do you explain the huge executive salaries, etc. They were obviously making money, even with those “huge” worker salaries.

  • pjkBP

    How much can Detroit’s financial woes be blamed on a reliance on gas-guzzlers and dragging heels on hybrids?

    I would like to see the article
    “How much can Detroit’s financial woes be blamed on UNFAIR TRADE”

    or
    “How much can Detroit’s financial woes be blamed on Japanese Tariffs on American Vehicles”

    or
    “How much can Detroit’s financial woes be blamed on Japanese car mfrs not paying US TAXES”

    or
    “How much can Detroit’s financial woes be blamed on BIAS IN THE FOREIGN OWNED US MEDIA”

  • thomatt12

    Good news for the GM Chrysler brand…