"they have ceded dominance of the 8-bit marketplace to Microchip", I'd insert the words "non-automotive" in front of "8-bit".
The following is probably accurate:
"their dominance as the lead Automotive chip supplier is being threatened by ST Microelectronics"
but I'd widen the scope because there are many vendors pushing into the automotive sector. Even low-end 32 bit Arm chips are competing for this niche now that their price has come down dramatically in recent years. Freescale's 16 bit 68hc12/9s12 line is their key automotive line, and its pricing structure is currently too high to sustain the competition. Even Freescale seems to see the handwriting on the wall for their 16 bit line because they no longer advertise this line. They are focusing on the 8 and 32 bit segments, and this strategy is largely based on trying to get more people to use Coldfire. Their new RS08 chips are an attempt to compete with Microchip on the low end.
Your analysis about what will likely happen after the merger is dead-on. I couldn't have said it better. This is, of course, not particularly good news for users of Freescale chips.
Another problem with this kind of purchase is that we may not have access to any numbers about how well they do in the future, since they'll no longer be a separate public entity (if I understand this correctly). So they might tank in the future and it would be difficult for us to know just how badly they're doing. The same is true of Philips Semiconductor, now NXP.
By the way, Bill, have you considered starting a blog that could record your thoughts on an ongoing basis? This would make it easy to separate opinion from news and would be less likely to cause confusion (I'm not confused, but in this day of political correctness I could see hysterical people babbling on about this kind of thing).