Merger and acquisition talk abounds and the following two possibilities will not bring value to investors.
Why would General Motors (NYSE: GM) consider buying DaimlerChrysler AG's (NYSE:DCX) Chrysler unit? Is GM lacking scale? Has anyone accused it of not being big enough or broad enough? Hasn't it already acquired many brands over the years and still run up against superior Japanese and German manufacturers? Will acquiring Chrysler help rebuild its own brand? Does GM need Chrysler? The obvious answer is no, it does not.
What GM needs is better car design, improved and more uniform quality control, sharper focus, better vision, more efficiency, streamlined management structure and less overhead burden. How does Chrysler solve any of these problems? It doesn't!
GM has spent the last year addressing many of these issues and its stock performance has reflected this, as the best performer among the Dow Industrials. It should continue to refine the company in this manner and not deliberately go out looking for new and unwarranted challenges. If Daimler is selling, GM should not be buying!
The Sirius Satellite Radio Inc. (NASDAQ:SIRI) / XM Satellite Radio Holdings Inc. (NASDAQ:XMSR) deal has other problems. They are both big money losers and while they will save some money combining forces they are still in a bad business. They do not just compete with traditional radio but Internet radio which is ever improving and has billions of world wide consumers plugged in for free already. They are in very capital intensive business and they have less capital than their competitors.
I see no reason to get satellite radio and I certainly do not need one more monthly expense. This deal reeks of desperation. There is an old adage to Buy on the rumor and sell on the fact. In this case I would sell on the rumor and buy something else!
Check out my other posts for BloggingStocks here.
Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm.
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Reader Comments (Page 1 of 1)
2-20-2007 @ 3:09PM
JBDR said...
Who said GM is buying?
But what if Benz was paying to get rid of Chrysler?
If there is a transaction, look for all pensons of existing workers to be funded, Benz has already looted from the phony merger, only GM may be capable of making soup of the carcass left behind. Any other management would just be vultures.
2-20-2007 @ 3:28PM
John said...
Sheldon,
How long has GM and Chrysler for that matter been around? Quite a few and there are always going to be lean years. I would be willing to bet there going to still be around way after you and I are gone. As far as SIRI and XM, they have only been around for a few years so next time your are driving your car, see what people are doing inside of them, I bet they are listening to the radio. Please correct me if I am wrong. John
2-20-2007 @ 5:24PM
grobworthy said...
"I see no reason to get satellite radio"
Here's some reasons...
Because kids love the kidstuff and Disney channel?
Because Internet radio still doesn't let me press a single button in my car to get the specific type of broadcast I want.
Because SIRIUS is a content aggregator providing me with exclusive quality content choices including talk and sports channels that let me explore instead of surfing through crap or playing my own itunes collection that I know all too well.
If you actually had satellite radio, you'd realize just how addictive it is.
14 million people found a reason to get it. Maybe you need to open your mind and realize that the whole "why would anyone want sat radio" question is moot. People do. People have it already. And they like it.
2-20-2007 @ 3:45PM
Sheldon L said...
John,
Lately I see them talking on the phone, listening to iPod and screaming at other drivers.
Radio yes, satellite radio no.
AMC is not around. Chrysler would not be without governmant bail-out. Many car companies have gone out of business. The worst thing any company can do is think they will be around forever - there are no guarantees. GM has a better chance without Chrysler than with it!
2-20-2007 @ 4:25PM
Roger Johns said...
As a DCX employee I believe if GM was to purchase the Chrysler Brand it would be to close it up and eliminate competition. What price would you pay to remove local and US competition? GM says it wants the entire Corporation including Dodge and Jeep. Daimler is unwilling to let go of Jeep. I don't see the deal going through.
2-20-2007 @ 4:55PM
Sal said...
How are the two even comparable?
2-20-2007 @ 6:00PM
great4biz said...
Take at look at the Sprint Nextel merger. It's the biggest merger debacle in the last two years.
2-20-2007 @ 10:55PM
great4biz said...
Mergers are mergers. Management dictates the success not the merger itself. Take a look at the Sprint Nextel merger. It is the biggest merger trainwreck in the last two years. Bad management will kill any merger.
2-20-2007 @ 6:22PM
GRANT said...
I do not have sat radio and I personally don't want it but that does not mean that the 14 million people who already have it are not happy. People will always buy the next big thing just because it's the next big thing. I can remember when there was no such thing as cell phones or personal computers and now it's just common place. We as a society need to realize just because things make life easier that doesn't always make life better.
2-20-2007 @ 9:13PM
Thomas Edwards said...
The German board tolerated the take over of Chrysler because the ex CEO Sheremp convinced the company that with a merger will come growth will come profits. This has been the case. However, the thick headed germans have no patience for a 2nd round of risk so their forcing Zetsche to find a cure. If the company needs to be sold, it needs to be sold as a complete unit, not piece by piece. Chrysler employers need to stand up for their company.
2-20-2007 @ 9:36PM
Ronald said...
Overall, I think it will be interesting to see the outcome of these acquisitions and mergers. Both have seen a slight rise in their stock prices and a huge increase in buzz. Copy and paste this url to see the recent buzz pattern for GM/Chrysler and Siruis/XM Radio.
Link: http://www.blogpulse.com/trend?query1=GM+OR+%22General
+Motors%22+AND+Chrysler&label1=GM%2FChrysler&query2=%22
XM+Radio%22+AND+Sirius&label2=Sirius%2FXM+Radio&query3=
&label3=&days=60&x=38&y=16
Feel free to leave a comment or even visit my blog at http://www.conceptsmarketing.blogspot.com .
2-20-2007 @ 10:48PM
Chris said...
Apparantly the blogger does not have sat radio.He's the first person I heard of who doesn't swear by it.Once you try it you'll never go back.Especially if you have SIRI.
2-21-2007 @ 8:05AM
David Greenspoon said...
I can think of a few great reasons why I became a Sirius subscriber:
1. I currently live in an area with horrible commercial radio; Sirius gives me access to a wide variety of music and other programming I like whenever I want it, absent the hassles of CDs or an MP3 adapter for my car;
2. My family is on the road a lot for vacations, and the consistency as well as variety of known channels while we travel is deeply appreciated by my entire family, also absent the need for a bag of CD's at my feet or my kid's iPod;
3. The local cable monopoly does not carry teams that many folks locally want to follow, while Sirius at least allows folks to listen to games that are blacked-out locally;
4. What I pay per month is far less than what I volunarily donated to the decent local public radio station in my former community.
So Mr. Liber, it seems to me that your reasons against Satellite Radio are totally off the mark on this call. Congrats on living someplace that has decent radio that you never leave. For the real world outside of a metro tri-state area, Satellite Radio is a good deal that deserves more marketplace support.
Rabbi David Greenspoon
Pittsfield, MA
2-21-2007 @ 9:03AM
Tamer said...
The Sirius - XM merger is great news for the world of entertainment and technology. These two companies have the same vision cable companies had 30 years ago when they decided to charge for something people already got for free. $13 a month or $.43 a day is a very small price to pay to ensure great programming whether you are driving through rural areas with little commerical radio or through the big markets. Not to mention never having to search for your favorite music genre ever again because while driving coast to coast the channels stay the same. Futhermore for just $13 a month I will get every MLB, NFL, NHL, NBA (but who really cares about that), March Madness, NCAA Football and NASCAR. Not to mention the King of All Media, Howard Stern, Frank Sinatra, Martha Stewart, Playboy Radio, Bob Dylan and all the other great programming that commerical radio can not match. I am proud to be a Satellite and I can not wait to see what Mel and the rest of the company have in store for us, include Satellite in vechile video.
2-21-2007 @ 9:06AM
whimsicalminis said...
I totally agree with the comment that Diamler got what it wanted from Chrysler. Before the "merger" Chrysler had heavy cash reserves. Diamler had impending debt coming with war crimes committed. Chrysler employees knew it was a bad idea but the big guys made out like bandits when their jobs were "phased out". Who are the loosers.....us. Personally we feel pimped out, and thrown to the curb, even though Chrysler has bailed out Diamler many times. They had huge problems with massive leases coming in out of equity and had a recent mechanical issues.
Chrysler was diversified enough to hold it's own before the "merger". Now I am worried that Chrysler will be able to survive without it's other assets that Diamler wants to hold on to such as airbus, freightliner, etc.
BTW- I am a wife of a long time employee.
2-21-2007 @ 6:19PM
Ken said...
We have had our XM Radio for four years now, in fact we have four subscriptions. The entertainment is worth every penny. If we are in the car, at home we have commercial free music. Everytime we have to listen to regular radio we are ready for the funny farm in 10 minutes. They do 3 minutes music then 10 commercial of one sort or another. We love our XM
2-21-2007 @ 8:57PM
George said...
Sirius is the best thing that has happened to radio. Clear Channel has monopolized every major market in the country. Radio stations play the same 15 songs every hour. Does Tampa really need 4 classic rock stations? (How many times can one take Led Zepplin or Lynard Skyndard?) 3 hip hop stations? 2 country stations? Since purchasing Sirius I will never go back to terrestrial radio. Ive had it with regular radio and will never go back.
2-21-2007 @ 9:52PM
Sheldon L said...
To all the satisfied Satellite Radio subscribers. I am glad you are enjoying the opportunity to be part of this trend and maybe someday I will change my mind about subscribing if these companies survive their 'burn rates'. Some great testimonials have been given and I have taken note. Thank you for taking the time to comment.
I am not convinced however that speculating on these companies from an investment perspective is sensible with all the other opportunities available. While many commented that traditional broadcast radio was awful and limited, the same is not true for your investment dollar.
Peace