It’s amazing when Cerberus outbid Magna to buy Chrysler I said it was a doomed deal. And what happened? Fiat bought a stake in Chrysler for zip, nada, zero! Cerberus f***d up this deal. But hey private equity is dumb as wood sometimes and lo and behold they are about to make another move that one has to question.

This new private equity deal promises to keep all plants open, and will need less money to do this than Magna. Wow, Ripplewood you are smarter than Magna, and Fiat (after all Fiat dropped out due to the conditions). Ripplewood is saying that they are smarter than the CEO’s who created or turned around corporations! I say that this is galling! But then again was this not a doomed deal to begin with?

Magna hatte sich während der Verhandlungen zur Zukunft von Opel über die GM-Führung beklagt. Sie sei „hochnäsig“ aufgetreten und habe die Geduld der Interessenten strapaziert, berichtet die Zeitung. Demnach seien Magna-Gründer Frank Stronach und sein Co-Chef Siegfried Wolf bei direkten Gesprächen mit der GM-Führung in Detroit auf wenig Kompromissbereitschaft gestoßen. Für den Zulieferer werde ein Einstieg in Rüsselsheim dadurch teurer und das Risiko höher.

What this is saying is that when Stronach from Magna approached GM management in Detroit they were very arrogant and tedious. Really? No kidding! But Stronach did it anyways because Stronach wants a car company. I can understand that.

You see I have this thinking that GM management still does not get it. If you looked at the framework of the deal GM America still held a huge chunk of Opel and could buy it back. I am getting the feeling that GM feels that this is just a “road bump” and when things get better everything will be back to normal. However, I don’t think that will happen because GM is missing the point.

The reason I think GM prefers Ripplewood is because Ripplewood has the cash to burn until GM buys back Opel from Ripplewood. After all if you do some research on Ripplewood you see they buy distressed companies only to sell them again at a later point in time. Thus GM is thinking they will have to pay a premium in the long term to get things to work in the short term.

But this is the crux of the overall GM problem. GM has no long term if they can’t get their short term straight. Look at Ford, hard decisions were made and followed through. The management at Ford is brilliant and effective, and as disclosure I own Ford shares and am not giving them up because I do believe in Ford!

My advice to Stronach at Magna is wait a few years! For what you wanted to pay for Opel today you will be able to buy the whole company in about 3 years! And then you can clean house and really make changes at GM!


But there is a bright side to this…  With GM out of the way in the future car market it can only enhance the profitability of other car makers!

Want to know who I think will be the next car maker to fall in about 10 years? Volkswagen! But that is another story for another day…