Dowries back in style! GM and Chrysler looking to get hitched if the wedding gifts make it worthwhile

I had discussed the merger rumours a couple of weeks ago.

via the New York Times (found at Some Assembly Required):

“G.M. and Chrysler’s majority owner, Cerberus Capital Management, are said to be committed to a merger of the two troubled automakers but have yet to line up financing to inject more cash into the companies.

But investors are hesitant to put money into the deal without federal assistance in some form, possibly a direct loan or an equity stake, said people close to the talks who spoke on the condition that they not be named.”

Am I crazy to think that despite the 30-40% falls (that will continue for at least a year or so) in auto sales for GM and Chrysler that this might be a great time to buy GM stock?  I feel a bailout / Federal assistance is guaranteed, considering the employment and the idea of American productivity GM represents (or did represent).  And certainly both near-bankrupt companies, hemorrhaging money, are very fond of the idea of shedding much of their non-union staff in a merger.

GM is currently sitting at $5.60 (including after hours trading).  I am fairly optimistic in the Volt, especially with the $7,500 tax break for Volt purchases that was included in the TARP.  I can’t imagine the Federal government going halfway by providing $25 billion in loans and the tax break without doing what it can do guarantee GM and the Volt are still around to benefit from them in a year (GM is losing $1 billion per month, according to the article, but they also managed to lose $18.8 billion in the first half of 2008…)

So GM can’t go bankrupt, by my logic, but they could still continue to fall in share price.  I just can’t imagine by very much.

But how much could they gain even in the event of an announced merger with Chrysler?  Due to union rules, I imagine a very large number of redundant (and expensive) staff at GM-Chrysler will be difficult to layoff.  The research and development costs, marketing, and fully 60% of their dealership network could be shut down (not that a smaller percentage of dealerships weren’t heading to closure already).

I am going to pull a number out of my ass here… $14?  Why not?

I’m been watching GM since they first dipped below $10.00, but the climate was never quite as promising as now.  I think tomorrow morning, I may re-enter the stock market after a 3 week or so sabbatical.

I found this after reading the NYT article (Forbes):

“People briefed on the merger discussions previously have said GM would need a minimum of $5 billion to start restructuring Chrysler’s operations. The total amount needed could reach $10 billion, the sources have said.”

Whaaat?  That’s nothing!  That certainly isn’t enough to make Paulson work on a Sunday.  He might as well just give it up (and I say this BEFORE I become a GM shareholder).

To keep from having a major American institution go bankrupt and add further panic to the market (as well as any companies that might be closely tied to GM… I shiver at the thought of another CDS imbroglio), $10 billion sounds like a bargain.  Especially since unlike the financial institutions bailed out so far, GM actually has something in the works worth looking forward to (the Chevrolet Volt).

Do it for me, Feds.  You owe me.  Those short bans ruined a bunch of my put contracts.

… and the cow goes moo