GM-Chrysler Merger Talks Exaggerated by Media

In the tricky waters of merger negotiation coverage, what a difference three days makes.

When the news -- if you'll call it that -- broke on Friday, General Motors ( GM) and Chrysler were in "preliminary talks" about a "possible merger." Negotiations were "not certain to produce a deal." Almost everything written about the chatter between GM and Chrysler in The New York Times story that brought the merger talk -- if you'll call it that -- to public light, was appropriately measured and clearly speculative.

Big, desperate companies are always flailing about at ways to save themselves or just buying time with shareholders by appearing to take steps in that direction. As we've seen in troubled industries such as the airlines, everyone talks all the time. So as not to lead savvy investors on, the coverage of talk between two troubled sides has to be portrayed with the proverbial grain of salt. And that's just what the Times did, at least the first time around. The passage of a day or two is never kind to proverbial grains of salt, though, as we'll see.

On Friday, in the story that brought the talk to light, the Times' headline -- " G.M. and Chrysler Explore Merger" --used the right verb: "explore." After all, that's all the two companies were doing.

The lead continued the thread of responsibility with all those words like "preliminary," "possible" and "not certain" that give you, the savvy investor, the accurate sense of where such talks from such outfits in such times probably stand:

"General Motors is in preliminary talks about a possible merger with Chrysler, a deal that could drastically remake the landscape of the auto industry by reducing the Big Three of Detroit automakers to the Big Two.

"The talks between G.M. and Cerberus Capital Management, the private equity firm that owns Chrysler, began more than a month ago, and the negotiations are not certain to produce a deal. Two people close to the process said the chances of a merger were '50-50' as of Friday and would most likely still take weeks to work out."

Many of the wire services and others aped the Times' language (praised be to them), but after speculation has been repeated incessantly in articles and on television, it gathers the air of truth. Repeat something endlessly and it magically gains validity, even when the circumstances don't change.

By Saturday afternoon, Business Week started off an article with a headline and lead that made no mention that talks were in any sort of an initial stage. Instead of hedged language about the long-shot chance of any deal taking place, Business Week used words like "survival" and "salvage" and offered no qualifiers before words like "talks."

Headline: " GM Plus Chrysler Equals Survival? The automakers may try to salvage one healthy company out of two sick ones."

Lead: "General Motors and Chrysler have had discussions about merging operations amid widespread speculation that neither can survive the current global economic meltdown in the financial markets, according to executives at both companies who spoke on condition of anonymity. The talks were reported on the Web sites of The Wall Street Journal and The New York Times late Friday, Oct. 10, the same day GM issued a statement denying that it's considering Chapter 11 protection."

By this morning, the Times (which had done such a good job initially) had even gotten into the game with an article called " A Potential Merger Weighs on Detroit."

There was no news whatsoever on negotiations progression. Rather, with a few days and endless repetition, Friday's "not certain" became Monday's "potential."

The article came at the issue sideways, talking about Detroit's reaction to the possibility, but in doing so without employing the same responsibly hedged language used three days before, it hyped the situation. The 50-50 odds line was relegated to burial in the middle of the article and followed immediately by a line that seemed to imply better odds: "Yet there appear to be pressing reasons for Cerberus which owns Chrysler to make the deal."

And all those words and phrases in the lead of Friday's article that made clear to the savvy investor from the outset that this was early-on talk if there ever was any? Replaced with firm phrases such as "once-unthinkable" and "gut-punch."

Read the lead and weep: "The Motor City spent the weekend considering the once-unthinkable prospect that its traditional Big Three automakers might shrink to the Big Two.

The merger talks between General Motors and Chrysler, first revealed on Friday, are yet another gut-punch to a city reeling from a mayoral scandal, soaring foreclosure and unemployment rates and huge losses in its hometown auto industry."

Revealed? Well, it certainly is a revelation how much of a difference three days can make when it comes to the business media using language that could mislead investors.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven� column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback; click here to send him an email.

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