Chrysler for Sale? Apparently

February 20, 2007
By: Robert Silverman

As we reported in an earlier post, Chrysler announced a heart-breaking restructuring plan Valentines Day. Now comes word that the company is for sale…

From Car Connection
by Joseph Szcesny

Momentum continues to build behind the speculation about a potential sale of the Chrysler Group as investment bankers retained by DaimlerChrysler AG reportedly began to launch an auction of the company’s American wing.

DaimlerChrysler officials, meanwhile, said nothing has really changed since last week when Dieter Zetsche, DaimlerChrysler’s chief executive, said the company was looking at all of its options and declined further comment.

However, Chrysler Group officials also said privately that the fate of the company is now basically in the hands of the company’s German high command in Auburn Hills, which appears to be calling all of the shots, including the recent discussions with General Motors Corp.

Moreover, morale in Auburn Hills has continued to decline as the realization that Zetsche’s once seemingly unwavering support for the Chrysler Group has begun to buckle.

The Times of London reported on its Web site Monday that JPMorgan Chase & Co., in a memorandum the investment bank planned to circulate to potential suitors, was asking $13.7 billion for Chrysler or about a third of what Daimler-Benz paid for the unit in 1998.

The relatively low valuation was certain to infuriate the German shareholders who own 80 percent of the stock in DaimlerChrysler. Dissident shareholders, who have been growing stronger over the past couple of years, have been saying for years that the acquisition of the Chrysler Group was a poor investment and the numbers bandied about now suggest they are right.

However, one company highlighted in speculation as a potential suitor, Korean automaker Hyundai, said emphatically it was not interested in pursuing any kind a deal for Chrysler. Hyundai has been caught up in a leadership crisis in recent months, following the criminal conviction of its principal executive.

“We are not considering to buy Chrysler because our hands are full,” Hyundai spokesman Jake Jang said.

The Times, however, said several interested bidders had already started due diligence on Chrysler in the weeks ahead of DaimlerChrysler’s Feb. 14 announcement. The Wall Street Journal also said several large car makers from the U.S., Europe and Asia had approached the company but did not identify any of them

The Associated Press said several European carmakers, including France’s PSA Peugeot-Citroë n, Renault SA, and Italy’s Fiat Group declined to comment on whether they had an interest in the Chrysler Group, which lost $1.4 billion last year.

Stephen B. Cheetham, European auto analyst for Sanford Bernstein Ltd., said in a note to investors that Ford Motor Co. and General Motors Corp. might be interested. However, both companies’ shaky finances are working against a deal.

“(We) see significant synergies with Ford, but its new CEO probably prefers a solo turnaround – at least thus far,” he said. “GM is unlikely to be interested, while vehicle designs and U.S. market access are attractive to an Asian buyer – but its unionized cost base is not,” he suggested.

Laurie Harbour-Felax, president of the Harbour-Felax group said a GM-Chrysler deal probably would fail. “I just don’t see the synergy,” she said. In addition, unsnarling the overlapping dealer networks would be a monumental and expensive task that could choke off any potential benefits, she said.

“We don’t like the deal at all,” said Bill Smith, chief executive officer of Smith Assets told Bloomberg.

Separating Chrysler from Mercedes-Benz also could be much more complicated than outsiders believe, observers said. The two companies now have a much broader sharing of engineering services. In addition, the company now has a common purchasing organization and increasingly common bill of materials, they noted.

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