DCX to fend off any attempt to break up company

[nadepalma]

http://www.detnews.com/2005/autosins...uto-151767.htm

FRANKFURT - Prospects of breaking up DaimlerChrysler seem slim despite a report that private equity firms have approached major shareholders about dismantling the carmaker, financial sources said on Friday.

Bankers and analysts said mounting such an onslaught would be very expensive and face intense political resistance, even though the German-American group's management is under pressure to boost its stuttering performance and its return on assets.

Britain's Financial Times newspaper cited a senior investment banker close to the situation as saying Deutsche Bank , DaimlerChrysler's top investor with a 10.4-percent stake, had been approached a number of times in the past 12 months about breaking up the group.

Other shareholders -- including the Kuwait Investment Authority, which owns 7.2 percent -- were also understood to have received offers, but rejected them as too low, it said.

DaimlerChrysler and Deutsche declined to comment.

Financial sources told Reuters they were not aware of any approach to Deutsche Bank and that a takeover and breakup of DaimlerChrysler was highly unlikely.

It was also improbable that Deutsche would sell its stake given the current stock price -- 31.64 euros at 5 a.m. EDT -- because the shares were on Deutsche's books at "around 40 euros", the sources said.

The stock shrugged off the possibility that the world's fifth-biggest carmaker, notorious for underleveraging its substantial assets, might finally be broken up.

DaimlerChrysler shares fell 1.3 percent while the DJ Stoxx European car sector index declined 1.5 percent.

The share is the second-worst performer this year in the index, which it has lagged by nearly 17 percent in 2005.

"The probability of something like this happening is relatively remote," Sal. Oppenheim analyst Michael Raab said.

"A complete acquisition of Daimler would cost 113 billion euros ($145 billion) in enterprise value plus a takeover premium of at least 10 percent, so somewhere in the ballpark of 125-130 billion," he said.

"In order to pay that amount, a lot of financial investors would have to get together if they want to fillet the company. But the higher the number of investors, the lower the chance is that they will be able to agree how to break it up," Raab said.

One investment banker who follows the sector closely said DaimlerChrysler's market capitalization of nearly 36 billion euros made it a big fish to fry for breakup-minded raiders.

"It is not inconceivable but it would be an extremely aggressive thing and there are quite a few things going against it," he said, wondering why the Kuwaitis would sell now if they believed management could engineer an earnings rebound.

Breaking up the group would reverse the 1998 merger between Daimler-Benz and Chrysler that Chief Executive Juergen Schrempp has always boasted created the first truly global carmaker.

But such a split-up also had industrial logic that would create value, the banker said.

"You could definitely spin off a Mercedes. That is a very interesting asset for a lot of people," he said.

The group also has the world's top commercial vehicles maker and a financial services arm.

Additional reporting by Hans Nagl and Christiaan Hetzner in Frankfurt and Jan Schwartz in Hamburg

[MaxLegroom]

This should prove interesting. Spin off Mercedes, and the next generation of Chrysler products will be the worse for it. On the other hand, Mercedes has had recent quality problems, the results of a recent ADAC survey shows that in Germany, you're more likely to be pleased with your new Chrysler than a new Mercedes. This was published in a recent Automobile magazine discussing specifically thr difference between perceptions of German quality and the reality.

[gacSTclass]

Lame logic. Spin off Mercedes and how many years before they go looking for a Big Daddy manufacturer to help them to keep costs in line?

[AdmiralViscen]

Ugh, I'd love to see a free Chrysler. Though they'd probably come out of it really broken up, and ****ed for a decade.

[AJR]

Originally Posted by AdmiralViscen

Ugh, I'd love to see a free Chrysler. Though they'd probably come out of it really broken up, and ****ed for a decade.

I'd like to see it happen as well. The possible outcome you listed doesn't even bother me anymore.

[mk1700]

The Map of the Auto industry is changing very fast!

[mbukukanyau]

When this dance is over, I bet you GM Toyota Ford will come out dancing.. you know why, GM is too complex for anyone to want to touch it

[mbukukanyau]

Originally Posted by GMCSonoma

There was rumor back in 1998 of GM looking at Chrysler. I also heard Chrysler was offered to GM except for Jeep, which MB wanted. How true this all was, I do not know.

GM would not want Jeep, they have Hummer, Which they can make into a full line SUV company, by making one last vehicle H4 Beggining under 20 K up to the 30 K range, thus covering the entire market price range...

[dav305z]

Originally Posted by AJR

I'd like to see it happen as well. The possible outcome you listed doesn't even bother me anymore.

Same here. An America Chrysler would be terrific. I don't care if they would be messed up at first and honestly I don't think they would be that badly. They are still very much a complete auto manufacturer, as opposed to, say Saab, which is now a division.

[New_Mexico_Sunset_on_Rt66]

So Mercedes is having cost issues now? Interesting.

[Ohmywrd]

Chrysler even has quality issues. I like Mercedes though because of their design. Everyone I know who owned Chrysler/Dodge products or know someone who did, they all had transmission problems. That along with Ford. Everyone I know who had GM products have seemed to be pretty happy with them except my sister's third Grand Am GT which fell apart like crazy. That's the only complaint I heard.

[mgescuro]

I don't believe that either company would be able to survive without each other.

Mercedes is not longer a "quality" automobile.
Chrysler, without the resources it gets from Daimler, is dead in the water.

The synergies between the 2 companies are quite evident. The problem they have is a cultural problem. Germans don't like the way Americans work... and vice versa.

GM doesn't need Chrysler... it has Buick. GM doesn't need Dodge... it has Chevrolet. GM doesn't need Jeep... it has HUMMER.

All GM needs to do i create a an "H4" of sorts, launch a Zeta/Sigma II/Zeta-Lite, affordable RWD vehicle... and Buick and Chevy will be set.
The only worthwhile piece for GM to have is Maybach.

[VivienM]

Originally Posted by mgescuro

The only worthwhile piece for GM to have is Maybach.

And Maybach, without the economies of scale that come from 'borrowing' various parts from the S class (twin-turbo V12, anyone?), is probably not going to make much money...

Are the things even selling? I was surprised to see one this week in a CSI(:NY, I think?) episode, actually.

[Bravada]

I don't think that Maybach IS actually making any money, because AFAIK they're far behind their break-even point of 1000 cars sold per annum. The case is similar to the Phaeton - nobody really wanted the car but some influential guys on the MB board who now try to push the product, because it would be too much shame for them to pull the plug.

Anyway, without component sharing this car would certainly be even more of a burden to any company.

I guess MB and Chrysler could both have found better partners in 1998, but now it's just too late. They have slowly learned to co-exist in peace and Chrysler even started yielding profits under Zetsche.

[AJR]

Originally Posted by Bravada

I don't think that Maybach IS actually making any money, because AFAIK they're far behind their break-even point of 1000 cars sold per annum. The case is similar to the Phaeton - nobody really wanted the car but some influential guys on the MB board who now try to push the product, because it would be too much shame for them to pull the plug.

Anyway, without component sharing this car would certainly be even more of a burden to any company.

I guess MB and Chrysler could both have found better partners in 1998, but now it's just too late. They have slowly learned to co-exist in peace and Chrysler even started yielding profits under Zetsche.

Chrysler did make profits before Dieter came in. In 1996 (or maybe 1998), I think Fortune magazine named Chrysler Corporation its company of the year. I believe they would have continued to make profits without Daimler in the picture as well - and if Robert Eaton would been shown the door.