If we all thought the merger process of Sirius and XM brought interesting times, imagine all of the comments that will come if Chrysler and GM pull the trigger on a rumored merger/acquisition! One thing that may be certain is that the auto companies can cite a "failing business" as a reason that such a deal should be approved.
For satellite radio, the deal could be very interesting. The biggest XM OEM partner joining up with the biggest Sirius OEM partner. As sector followers are aware, GM has an exclusive deal with XM, and Chrysler with Sirius. Interestingly, the GM deal has clauses that speak to what could transpire if a GM brand were to install Sirius radios, and that may bring about discussion of getting a fully interoperable radio into the OEM channel earlier than may otherwise have happened.
Now, to be clear, the satellite radio deals could play themselves out as currently structured. However, an automotive marriage could also mean that Sirius XM Radio will get a chance at renegotiating the current deals. It is widely known that the GM deal is expensive for satellite radio, and more than one analyst had made reference to that fact. Thus, it would benefit Sirius XM Radio to at least try to better their current deals should GM and Chrysler hook up.
Cerberus Capital owns 80.1% of Chrysler, and 51% of GMAC (the financing arm of GM). One proposal would have Cerberus trading their stake in Chrysler to GM for the remaining 49% of GMAC. It is an interesting proposal. Chrysler sales are way down, and credit markets are tight. The deal would solidify GM's position as a sales leader. Toyota has been chipping away at GM for a few years, and sometimes has been known to outsell the biggest U.S. car maker.
If there was ever a time to propose such a deal, it is now, and it may just have a decent shot at passing regulatory muster. The markets next week will be interesting to watch as the government takes a stake in big banks, and big automakers try to find solutions to their sales woes.
Position - Long SIRI, No Position GM