It sounds like simple common sense, but it bears repeating: two sinking ships cannot rescue one another. It’s especially worth repeating to the folks at General Motors (GM) and Chrysler as they apparently engage in earnest merger/buyout discussions. When a particular industry comes upon hard times, it is quite common for its players to begin a round of consolidating mergers. This can make sense in certain circumstances—especially if a small, struggling company happens to have expertise in an area that a large, successful company lacks. But even when it seems like a good idea, these mergers often end badly for the companies involved.
Highly-successful Commodore bought newcomer Amiga in the 1980s, and they both fell apart together not long after. Palm bought struggling Be Inc. in the early 2000s to use the excellent BeOS operating system as a foundation for a new Palm OS, and the outcome—Palm OS ‘Cobalt’—never amounted to anything and Palm is still digging out from that and other debacles. Microsoft bought Danger, producer of ‘Sidekick’ mobile phones, and we have yet to see any meaningful improvement in Windows Mobile because of it. Daimler bought Chrysler (claiming it was a ‘merger of equals’) and, again with no meaningful synergy, unloaded the Chrysler division years later. Time-Warner and AOL merged too, and they are still struggling to figure out why and how to undo it gracefully.
If things so-often go this poorly even when one or both merging companies are doing well, imagine how it goes when failing companies merge. A combined GM and Chrysler is already drawing comparisons to the 1954 merger of Studebaker and Packard. That combined auto firm survived, barely, for ten years before ingloriously exiting the auto industry.
At this point, GM and Chrysler need to drastically simplify their product lines . . . not muddle them further with even more internally-competitive brands and vehicles under a single corporate structure than they each already have.