MergersAndAcquistions posts

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GM/Chrysler or Sirius/XM: Two losers don't equal a winner:

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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Last updated: May 27, 2012: 04:43 AM

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