Report: Chrysler shopped to private equity

[nadepalma]

SOURCE: http://money.cnn.com/2007/02/23/news...ion=2007022307

Report: Chrysler shopped to private equity
Four buyout firms among those being contacted about possible bids for DaimlerChrysler unit, newspaper says.
February 23 2007: 7:41 AM EST

NEW YORK (CNNMoney.com) -- Four of the nation's largest private equity firms have been contacted about possibly buying Chrysler Group from DaimlerChrysler, according to a published report.

The Financial Times reported Friday that Apollo Management, Blackstone Group, the Carlyle Group and Cerebus Capital, as well as several European firms, have all been contacted about their potential interest in the troubled North American automaker.

On Feb. 14 DaimlerChrysler (Charts) executives said they would look at all options for Chrysler, including a possible sale or spinoff of the automaker that was acquired by Daimler-Benz in 1998. They also announced plans to cut 13,000 jobs and close plants to cut losses in North America.

Chrysler Group had an operating loss of $1.5 billion in 2006, even as the parent company reported a $7.3 billion operating profit.

There have been published reports that General Motors (Charts) has held talks about possibly acquiring its troubled rival. But more analysts and industry experts have discounted that possibility, especially since GM is also struggling to stem its own operating losses on its core North American auto operations. Neither GM nor DaimlerChrysler executives have commented on the reports of those talks.

Friday, Reuters reported that a spokeswoman for Volkswagen said the German automaker has no interest in buying Chrysler.

Several other automakers, including the alliance between Nissan (Charts) and Renault and Korean automaker Hyundai, said earlier this week that they are not interested in acquiring Chrysler.

Investors also appeared to have discounted the likelihood of GM or other major global automaker buying Chrysler, as they lifted DaimlerChrysler shares far more than they have punished GM shares.

Still, some analysts have suggested that the three brands that make up the Chrysler Group - Chrysler, Dodge and Jeep, along with their dealership network - still have enough value to attract a buyer, even if it's not by another struggling automaker. And those expecting a sale have generally pointed to private equity firms as the most likely potential buyer, although some have also suggested a growing Chinese automaker might also consider a bid as a way of jumping into the lucrative North American market.

Private equity firms have shown a willingness to invest in troubled industrial companies. For example, Cerberus was one of the lead investors in a $3.4 billion investment in bankrupt auto parts maker Delphi announced in December. It also acquired a 51 percent stake in GMAC, the finance arm of General Motors, last year.

Carlyle was part of the consortium that bought the Hertz Global Holdings (Charts) from Ford Motor (Charts) in 2005. While it has since had an initial public offering for the car rental company, it still holds a 24 percent stake in the company.

GM, Chrysler and Ford are all struggling with huge retiree health care costs that give them a competitive disadvantage with rivals such as Toyota Motor (Charts), which passed DaimlerChrysler to be the nation's No. 3 automaker last year and is poised to pass Ford this year. It also is expected to finally top GM in global sales for the first time in 2007.

The Wall Street Journal reported Friday that DaimlerChrysler plans to offer detailed financial information about its Chrysler Group selectively.

The Detroit News reported Friday that Chrysler Group CEO Tom LaSorda held a conference call with dealers Thursday to try to assure them that Chrysler Group will continue, no matter what DaimlerChrysler decides to do with the unit.

"We have a strong future and we are determined to bring the company to profitability as soon as possible," LaSorda told the dealers during a 10-minute call, the paper reported. "The Dodge, Jeep and Chrysler brands are here to stay."

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[tamatt27]

I think this is a better option than GM buying them.

[nadepalma]

Originally Posted by CNN Money

Four of the nation's largest private equity firms have been contacted about possibly buying Chrysler Group from DaimlerChrysler, according to a published report.

The Financial Times reported Friday that Apollo Management, Blackstone Group, the Carlyle Group and Cerebus Capital, as well as several European firms, have all been contacted about their potential interest in the troubled North American automaker.

Notice they have been shopping it to THEM and not the private equity firms coming to DCX --- at least with GM, they went to DCX and said, "sell us the company" and showed interest. I give priavte equity groups a huge deal of respect -- they take a company private and have a lot of "tools" available to them to fix operations without public scrutiny, which publicly traded companies lack. But in this case, I'm not sure if it's possible and might be too much of a problem child. Regardless, the very fact that GM when to DCX and now these folks at DCX are shopping it to investment firms kinda speaks to the possible "desperation" of finding a buyer....

Its only ONE interpretation of the situation, and by no means difinitive, but I thought I'd throw it out there.

[red_xtreme95]

MAN...i really wanted a GM to get Chrysler. well i hope the american companies get it

[skylark68]

Well, if someone does end up with Chrysler, this would be a preferable option, maybe even bring it back to the U.S. If everything worked out well, maybe they could even go public again.

[mkaresh]

This is just sad. Private equity firms are the last resort. Time for some slash and burn.

[uujjj]

Originally Posted by mkaresh

This is just sad. Private equity firms are the last resort. Time for some slash and burn.

i disagree. going private is the best option for chrysler right now. it is chysler's only chance to become an independent company. also, a GM acquisition would probably mean more slashing and burning than going private.

[throwback]

Private equity firms will gut the company and sell of the remains, by any means necessary. They would only buy Chrysler IF they could make a quick buck. They have no interest in being in the car business. They are in the money making business.

[01cavalier]

This might be the best thing, cut the losses. Too bad DCX mismanaged it and aren't treating it they way the treated Mercedes when they were in trouble. A private equity company can pertty much do whatever they want

[kenman923]

I would think that a private equity firm could produce the cash needed, but their pockets may not be deep enough to buy Chrysler. I think GM is going to get Chrysler for a song.

[KingElvis]

Originally Posted by mkaresh

This is just sad. Private equity firms are the last resort. Time for some slash and burn.

No kidding. P E Fs represent circling vultures.

[PhishPhood]

Originally Posted by throwback

Private equity firms will gut the company and sell of the remains, by any means necessary. They would only buy Chrysler IF they could make a quick buck. They have no interest in being in the car business. They are in the money making business.

Agreed. These companies are not in the business of running and setting long term strategies for a heavily capitalized manufacturing operation with massive fixed costs.

These are asset marketers. Buy low and sell high. It doesn't matter whether the assets are nylons, drugs or autos. Buy for $.30 on the $1 and try to turn it over for $.50 on the $1 by selling off the assets whole or in parts.

[KingElvis]

Originally Posted by throwback

Private equity firms will gut the company and sell of the remains, by any means necessary. They would only buy Chrysler IF they could make a quick buck. They have no interest in being in the car business. They are in the money making business.

Sadly, you are correct. PEFs are like a rendering factory, they slice off the meat and throw away the skeleton. Mrs. K and I have a PT Cruiser and Charger. I've also owned a '69 300 which I adored. Looks like my warantee won't be worth a bucket of warm spit.

Chrysler has such a proud heritage - much of its postwar history has been feast and famine. They were riding high in the early seventies, then by '79 they were at death's door.

Hopefully the PEF vampires won't swoop down to feed on the carcass. At this point, we should pray a Chinese maker rides to the rescue as a White Knight.

[VibenPontiac]

Originally Posted by mkaresh

This is just sad. Private equity firms are the last resort. Time for some slash and burn.

Your knowledge of what Private Equity Groups actually do is so inspiring!! Care to tell us why a sale to PEGs is "the last resort".

Originally Posted by throwback

Private equity firms will gut the company and sell of the remains, by any means necessary. They would only buy Chrysler IF they could make a quick buck. They have no interest in being in the car business. They are in the money making business.

Nice to know your knowledge of PEGs comes from the movies "Wall Street" and "Other People's Money". How about paying attention to actual practices of PEGs instead of relying on generalizations spawned from movies and pop-culture. The overwhelming majority of Private Equity transactions create value by making the business run more efficiently, growing revenues and increasing profitability, not by selling of parts and pieces...Even KKR didn't do that with RJR Nabisco.

[KingElvis]

If PEFs are so great, why did Chrysler desire to be acquired by another automaker as a 'first resort?'