MERGER OF A FIRM

Merger or Acquisition with This Firm

Merger or Acquisition with This Firm

a. A brief background of the industry which the company operates

Most agree that the crisis has occurred mainly as a result of the poor business practices of the Big Three U.S. automakers? since Asian companies that manufacture automobiles in the U.S. are not experiencing similar problems. A December 22? 2008 New York Times article stated? "For the most part? the so-called auto transplants — foreign-owned car companies with major operations in the United States — have deep pockets and ample credit? and they are not facing potential bankruptcy like General Motors and Chrysler." (www.saab.com) In 2006? Consumer Reports reported that all 10 of the cars that it considered to be the 10 best were built by Japanese companies. (www.saab.com)

However? in December of 2008 Toyota Motor Corp. stated that it will post its first operating loss since the post World War II era giving credibility to arguments made by the Detroit automakers that this problem isn't entirely theirs. While Michigan lost 83?000 Big Three auto manufacturing jobs between 1993 and 2008? more than 91?000 new auto manufacturing jobs were created in Alabama? Tennessee? Kentucky? Georgia? North Carolina? South Carolina? Virginia and Texas during that same time period. The US automakers known as the "Detroit Three" had considerably higher wages due to their unionized workforces? including salaries? benefits? healthcare? and pensions. In return for labor peace? management granted concessions to its unions that resulted in them having uncompetitive cost structure and significant legacy costs. A "Jobs Bank" was negotiated with the UAW union in 1984? and in 2005 it paid 12?000 workers to show up daily and stay for their full shift? even though there was no work for them to do. By early 2009? the global automobile industry was in a deep slump. Sales were dropping substantially. Auto makers were short of cash—some? including Saab? took bankruptcy. GM and Chrysler each received a combined $17.4 billion in federal aid? which was tied to a requirement that the firms develop specific plans for staying afloat. Those plans include concessions from labor unions? fewer workers and fewer plants. Very substantial additional sums of aid or financing will be required if GM is to stay solvent. Chrysler also has significant financial problems? and its private owners are attempting to put together a strategic relationship whereby Nissan would own about 35% of the firm. U.S. car manufacturers will cut capacity by at least 500?000 units yearly. (www.saab.com) Outside of the U.S.? Toyota received some financing from the Japanese government? and car makers throughout Europe and Asia were seeking concessions and/or financial aid. Further auto industry bankruptcies are inevitable? possibly at auto manufacturers? and definitely at auto dealers and suppliers. By February? 2009 was shaping up to be a very dismal year for the industry. In the U.S.? unit sales fell 41% over February 2008? despite generous rebates and discount offers. Analysts at Scotiabank Group expect 2009 sales to total a very weak ...