Though there are lots of suitors, it's hard to imagine why someone would want to marry DaimlerChrysler's (NYSE: DCX ) Chrysler unit.
Chrysler lost $1.5 billion last year, is closing two plants, and wants to fire 13,000 North American workers. DaimlerChrysler, the world's fifth-largest automaker, is definitely the ugly, red-headed stepchild of the car industry. Yet it's also apparently the belle of the ball.
Despite protestations to the contrary last year from Daimler's CEO, it seems that the company was courting anyone that built internal-combustion engines. China's Chery had talks, South Korea's Hyundai was there and gone, Nissan (Nasdaq: NSANY ) is lurking in the shadows -- as it has been with just about every American car manufacturer -- and now General Motors (NYSE: GM ) is in hot pursuit.
Chery and Hyundai are understandable. The former is looking for an entrance into the American market, and a Chrysler companionship would give it that, while the latter would give it a huge dealership network to expand upon. Nissan's CEO apparently just wants his car to mate with an American manufacturer -- any of them. But General Motors is harder to fathom.
The world's biggest carmaker (which is about to lose its spot to Toyota (NYSE: TM ) ) is also hemorrhaging cash. It has an intractable workforce and costly plants. Buying up Chrysler, even if it could do so for a fraction of the $36 billion Mercedes paid for it back in 1998, would be a costly proposition. While there's the lure of 2.7 million more car sales (putting it back in the lead for biggest carmaker), there doesn't seem to be much synergy.
The likely trimming of similar product lines could lead to even further plant closures. That means firing lots of blue-collar workers in addition to the inevitable white-collar redundancies. The United Auto Workers have already made a lot of concessions to GM, Chrysler, and Ford (NYSE: F ) , and they're not going to be too eager to give any more. GM would also probably seek to close a large swath of dealerships, since it would have little incremental need for them. Add $2 billion in unfunded pension and health-care liabilities, and there seems little left to fuel the imagination of a marriage here.
Of course, a merger is not the only possibility. DaimlerChrysler has said "all options" are on the table. That might include spinning off Chrysler again, breaking it up into pieces to sell off, or sharing technology with another company. That was part of DaimlerChrysler's original deal to get Mercedes and Chrysler working closer together.
There's a lot of rumor at work here, and most of the talk will turn out to be mere speculation. Yet if a sale is in the works, it would certainly make more sense for a smaller company trying to make a big splash in the American market -- Chery, Hyundai, or even India's Tata Motors (NYSE: TTM ) . There seems little reason for an American car manufacturer to take on any of the problems of this ugly duckling.