Rumor GM Buying Chrysler - Can Two Wrongs Make A Right As Ford's Way Forward Falls Behind?

L-R: Dr. Dieter Zetsche Chairman of the Board and Hartmut Schick Head of Global Communications for DaimlerChrysler, sit with Thomas LaSorda, President and Chief Executive Officer of the Chrysler Group, attend a press conference for DaimlerChrysler at their US headquarters in Auburn Hills, Michigan. DaimlerChrysler said it would axe 13,000 jobs at US unit Chrysler as part of a restructuring aimed at restoring its profitability by 2008.

... but he still looked a lot more confident than Chrysler chief Tom LaSorda in this photo below.

Those photos from the scene yesterday before the news this morning that GM was partnering with Chrysler to offer a version of the Chevy Tahoe together, followed shortly thereafter by furious, market-moving rumors that GM was really thinking of buying the Chrysler group from DCX outright and, according to some, had been in talks about the alliance for six months on the subject, which most commentators view as a huge liability for both in terms of avoiding the issues of legacy costs.

But that'd certainly ensure GM would remain the world's largest automaker and buy time in its silly horserace with Toyota. I suspect Toyota couldn't care less.

Now, whether GM's acquiring Chrysler is likely or even possible, it's a fascinating scenario to consider, especially in light of Ford's mea culpa today that it's turnaround plan is failing and how mistaken a set of decision making this might represent.

Here's an excerpt on the GM/Chrysler alliance:

DaimlerChrysler AG's (DCXGn.DE) Chrysler Group and General Motors Corp. (NYSE:GM - news) are in talks on a joint project that would provide Chrysler with a version of the big Chevrolet Tahoe sport utility, the New York Times said on Friday, citing people with direct knowledge of the talks.

The paper said there was no indication of when the two companies might reach a conclusion in the talks, which it said have been under way for about six months, according to the same sources.

The Wall Street Journal also reported on Friday that an alliance between the two Detroit carmakers was possible, citing people familiar with the matter.

An agreement is far from certain, the Journal said, and added that the sources discounted the potential that a possible GM-Chrysler alliance based on specific vehicles would develop into something deeper.

The Journal also reported that Chrysler's chief executive said he wanted to use new alliances to more than double sales outside North America.

The unit's previous goal, of doubling Chrysler sales outside North America from the current level of about 200,000 vehicles, was "not acceptable" and should be ratcheted up, the paper said, quoting from an interview with Chrysler CEO Tom LaSorda.

Alliances with other auto makers could cut the costs of that expansion, the paper said, citing LaSorda.

Chrysler is exploring partnerships to jointly develop vehicles, powertrains, axles and other aspects of auto making, the paper said.

Officials for Chrysler and GM could not immediately be reached.

And, here's an excerpt on the possible acquisition:

General Motors Corp. is in talks to buy the Chrysler Group in its entirety, Automotive News reported on Friday, citing unnamed sources in Germany and the United States.

The automotive trade publication reported on its Web site that high-level talks were talking place between GM and Chrysler Group parent DaimlerChrysler AG.

The potential deal between the two automakers could go beyond cooperation on joint development of a large sport utility vehicle, the magazine said.

A spokesman for GM declined to comment. "We often have discussions with automakers routinely. We don't comment on speculation of discussions," GM spokesman Tony Cervone said. DaimlerChrysler also had no comment on the report.

Speculation surrounding a possible sale or spinoff of Chrysler Group has built since DaimlerChrysler Chief Executive Dieter Zetsche said this week that all options were open for its struggling North American unit.

Shares of DaimlerChrysler rose in reaction to the report while GM shares slipped.

DaimlerChrysler shares were up 3.7 percent to $72.85 in trading on the New York Stock Exchange. Shares of GM were off 26 cents to $36.18.

Whatever they do, let's hope they avoid Ford's fate:

Ford Motor Co.'s "Way Forward" plan is falling behind and even the company's employees are losing faith, according to an internal Ford memo.

The contents of the memo, called the "Report Card for North America," were made public in a story in The Detroit News.

One strong point noted in the internal Ford memo was a strong launch for the new Edge crossover SUV.

Ford missed its January retail sales goals by 10,600 vehicles - which represents almost 1 percent of market share - and expects to miss its market share goals for February and March as well, according to the newspaper story.

The shortfall in sales was "due to greater-than-expected segment shift out of pickups, unfavorable share performance related to SUVs and lower-than-planned availability of [Ford's] new products," the internal report said, according to the Detroit News.

The report did note a strong launch for the company's new Ford Edge and Lincoln MKX crossover SUVs, the newspaper said.

Ford also expects to miss material cost reduction goals for February and March, The Detroit News said.

Meanwhile, an employee survey included in the report showed that only 47 percent of Ford workers have confidence in the company's long-term success. Fewer than 45 percent said they believe Ford's "Way Forward" plan is working, according to the newspaper story.

Even fewer employees - 38 percent - feel Ford has "the right products to move the company forward," according to the newspaper.

That number is four points higher than before the company showed off its future product line-up for employees in December, the newspaper said.

The report is part of a shift toward greater openness and communication within the company that is, itself, part of Ford's "Way Forward" turnaround plan, according to a Ford spokesman quoted in the story.

Ford's new CEO, former Boeing executive Allen Malleably, continues to hold weekly meetings with top executives to monitor progress on the turnaround plan.

The failure to meet short term sales and financial goals is less important to the company than access to cash and financial flexibility, said an analyst quoted in the story. In December, shortly after Mulally took over as CEO, Ford mortgaged its U.S. assets to secure $23 billion in financing.

The company lost a record $12.7 billion last year.

My own opinion? I think Detroit's Big Three should sell off all their manufacturing and consolidate brands and dealerships into the "Big One". Though getting all those full-size pickup truck buyers in bed together might be too little, too late as Honda and Toyota emerge as the real competitors in this last bastion of fat margins.