GM wants to buy Chrysler???

As reported in the New York Times yesterday, GM and Cerberus Capital Management (the private equity company that controls Chrysler and holds a majority share of GMAC) have been negotiating a deal in which GM would acquire Chrysler in return for the share of GMAC that it continues to hold. For GM, it would get GMAC's toxic subprime mortgages and car loans off of its books, and for Cerberus, it would get out of the car business. However, if this deal happens, it's likely to become the poster child for the adage "When two weak companies merge, you get a bigger weak company."

Other than limiting its downside exposure to the financial market, what would GM get out of this? Chrysler's product line is weak, especially passenger cars, and its product pipeline is almost nonexistent. Its strength is in trucks and SUVs, especially Jeep, but both those product areas have been especially hard-hit by gas prices. Chrysler's international position is far weaker than that of either GM or Ford. GM doesn't need Chrysler's dealers--it already has a bloated dealer structure that needs to be pruned. GM would pick up more plants, with more United Auto Workers contracts.

Even two months ago, this deal wouldn't have made sense, and it makes even less now. GM is having so much trouble turning itself around, why would it even consider taking on Chrysler? If there's any long-term logic to this deal, I don't see it.