Dieter Zetsche, chairman of the board of DaimlerChrysler AG addresses a news conference at the 61st International Motor Show (IAA) Commercial Vehicles, in the northern German city of Hanover Tuesday. - Reuters
FRANKFURT, Germany (AP):
The vaunted "merger of equals" that lawsuits could not upset may well be undone by the same simple principle that led to the creation of DaimlerChrysler: cutting costs.
With the company putting all options on the table for its struggling U.S. unit, the auto industry is pondering the fate of Chrysler and whether its parent will jettison a brand that critics say has dulled the sheen of the legendary Mercedes marquee.
Speculation about potential partners, or even a buyer, jumping in to use Chrysler's expansive parts and dealership network to gain entry to the U.S. market has ranged from a tie-up with Nissan and Renault to talk of a link with Hyundai to a homegrown deal with General Motors.
The possibilities have driven DaimlerChrysler shares up by 12 per cent since it first said it was mulling all options for the Chrysler Group.
On Monday they gained almost 4 per cent more to €56.26 (US$73.88), their highest level since July 2001.
DaimlerChrysler has kept mum on the talk since announcing last week that it had not ruled out any options for Chrysler - which, until a year ago, had kept the world's fifth-largest automaker profitable amid quality issues at the Mercedes Car Group.
But a failure to discern American consumers' changing tastes for more fuel-efficient models instead of light trucks led the German-American automaker to announce plans to eliminate 13,000 jobs in the U.S. and Canada, or about 16 per cent of its work force, and shutter a plant in Delaware in a bid to shave costs.
Fourth-quarter
earnings plunged
DaimlerChrysler's fourth-quarter earnings plunged 40 per cent on weaker demand at the Chrysler unit, where sales fell 7 per cent. Chrysler lost about US$162.8 million (€124 million) in the fourth quarter and had an operating loss of €1.12 billion (US$1.46 billion) for the year, compared to a profit of €1.53 billion in 2005.
Chairman Dieter Zetsche, who brought Chrysler back from the brink before taking over the entire company at the beginning of 2006, said last week all possibilities were open for the Auburn Hills, Michigan-based unit.
"We do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler," he said.
Amid the flurry of reports, a spokeswoman in Stuttgart reiterated Monday that the company was examining all of its choices.
"All we have to say at this point in time was what was said last week," Silke Walters told AP.
How much the company might ask for Chrysler is not even certain, with estimates ranging from US$5 billion to US$13.7 billion (€3.81 billion to €10.43 billion), depending on factors that include pension liabilities, health care obligations and fair value for plants and material.
Contrasting
In contrast, Daimler-Benz AG paid US$36 billion (€27.41 billion) for the American icon in 1998.
The Times of London reported on its website Monday that U.S. investment bank JPMorgan Chase & Company would start a €7 billion (US$13.7 billion) auction for Chrysler and planned to send out memorandums to likely suitors.
The paper, which cited no sources, also reported that several interested bidders had already started due diligence on Chrysler in the weeks ahead of DaimlerChrysler's February 14 announcement.
The Wall Street Journal, meanwhile, reported that Daimler-Chrysler was moving ahead with plans to sell or spin off Chrysler, citing two sources it did not identify.
The journal said several large car makers from the U.S., Europe and Asia had approached the company, but did not name them.
Hyundai Motor Company, the world's sixth-largest automaker, said it was not among those. "We are not considering to buy Chrysler because our hands are full," Hyundai spokesman Jake Jang said.
Others have declined to comment, including France's PSA Peugeot-Citroen and Renault SA, and Italy's Fiat SpA.
