The Good And Bad Of A GM-Chrysler Merger

Analysts say the cost of a merger between General Motors and Chrysler could be huge — the loss of at least 50,000 jobs. But they say if the companies don't merge, the economic damage could be even worse.

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NPR's business news starts with more talk of a GM-Chrysler Merger. It's a merger for which the companies might like some federal help. The Bush administration is under pressure from several state governors to provide rescue funds for the auto industry. GM and Chrysler are also pushing the government to help fund their merger and the two automakers have been talking about combining operations so both of them can better survive. Many say that's the best option, though it would bring painful cuts. NPR's Frank Langfitt reports.

FRANK LANGFITT: Most analyst say the best hope for two of the Detroit three is to come together but the cost of doing so will be big. Grant Thornton, the global accounting firm, says Chrysler would have to slash 16 models. And Kimberly Rodriguez, who handled the firm's analysis, says the company might have to lay off up to 40,000 workers.

Ms. KIMBERLY RODRIGUEZ (Analyst, Grant Thornton): The medicine is fairly bitter but fundamentally it's required.

LANGFITT: That's because demand for vehicles has collapsed amid yoyoing gas prices, the credit crunch, and a dismal economy. Rodriguez spoke to reporters on a conference call. She said the merge's impact would go far beyond the factory floor.

Ms. RODRIGUEZ: In the dealer area, the Chrysler and GM together about 22,000 franchises, that is likely to be hit substantially.

LANGFITT: Patrick Anderson runs Anderson Economic Group, a Michigan-based research firm. He expects more than a thousand dealers to close because of the merger.

Mr. PATRICK ANDERSON (Director, Anderson Economic Group): Michigan by far will suffer the worse from the decline in sales. But it's going to be felt in every single state and essentially in every midsize town in America.

LANGFITT: Anderson says the companies need billions in federal money to finance a merger. Closing down plants and paying severance to union workers is expensive. But Anderson says the alternative, perhaps an ugly bankruptcy, would destroy even more jobs.

Mr. ANDERSON: Well, essentially, almost all of Chrysler would go away and would go away fast. And it would go away in a very messy fashion. Although the companies have been in merger talks, they have made no announcement. GM has been pushing for federal money to support a deal that Washington has yet to weigh in. Frank Langfitt, NPR News, Washington.

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