First, I want to point out that most mergers in history are not successful.  Second, I would like to point out that most mergers happen between a company that is doing well and a company that is doing poorly or between a company that is doing well and a company that is doing ok.  I can’t recall any merger, especially a successful one that happened between two companies that are bleeding money.

Second, the talks surrounding the merger are not yielding much information, though various news outlets have quoted sources.  So most of what we think we know is speculation of some kind.  With that in mind I would like to add my speculation to the mix.

From most of the reports coming out of Chrysler (and I watch the company closely) it would seem that Chrysler is well on it’s way to becoming profitable all on its own.  Every time Nardelli or Press talked about Chrysler they said that they were meeting and exceeding their goals for becoming profitable.  Then the credit market seized up and a lot of things went out the window.

I believe that the guys at Cerberus think they know how to make any company profitable, and that includes automakers.  They took a look at GM and saw that GM was bleeding money fast and is in a tough position.  This makes them an easy target.  And why not?  Cerberus already owns one american automaker, combine the two and make them profitable and now you have a much bigger piece of the pie.

From there Cerberus must have done a study to find out what brands in a proposed company would be the most valuable.  They find out that the Chrysler brand itself is one of the brands that needs to go, so they can’t position the merger as Chrysler buying out GM.  It would look silly to have Chrysler buy GM and then shut down the brand that the company is named for.  So it needs to be positioned as GM buying out Chrysler.

This also helps out Cerberus by making GM the bad guys.  The only way to make the combined company work is to cut all redundant staff.  If it’s GM doing the buying and the cutting Cerberus comes out of this a lot cleaner than if Chrysler buys out GM and kills the staff.

There are reports that Cerberus (from the company itself) wants to have a stake in the combined automaker.  This would seem to support the idea that they want to combine the automaker and have a bigger piece of the pie.  Since Cerberus would probably be the biggest stock holder in the company they would get to cherry pick the board members that they want.  There are conflicting reports on this, Cerberus denies that they would can any of the GM board members, but most of the GM board seems pretty cool to the idea of a merger.  Why wouldn’t they if their jobs are gone after the merger?

Overall I see this as Cerberus seeing an opportunity to own a large portion of the biggest automaker in the world.  They think they can reduce costs by cutting redundant workers and improve the image and quality of their cars.  I think they’re biting off more than they can chew.