Chrysler breakup opposed
From the Detroit Insider:
Chrysler breakup opposed
DCX supervisory board member won't back any deal that cuts up U.S. unit
Christine Tierney / The Detroit News
STUTTGART, Germany -- The Chrysler Group's difficulties are becoming a burden for DaimlerChrysler AG, but a member of the German automaker's governing supervisory board said Friday that he would oppose a deal leading to a breakup of the Auburn Hills automaker.
"We wouldn't support a solution such as a private equity firm that would cut out choice bits," said Helmut Lense, one of the 10 employee representatives on DaimlerChrysler's 20-member supervisory board, which is similar to a U.S. board of directors.
In an interview with The Detroit News, Lense said he would prefer to see a manufacturing company, such as another automaker, take control of Chrysler in the event of a sale.
DaimlerChrysler is in talks with a small group of potential buyers, including General Motors Corp. and private equity firms Blackstone Group and Cerberus Capital Management LP, which has retained former Chrysler Chief Operating Officer Wolfgang Bernhard as an adviser, according to people familiar with the discussions.
Last month, as DaimlerChrysler reported a $1.5 billion loss for Chrysler, DaimlerChrysler CEO Dieter Zetsche said the company was considering all options for Chrysler, including a sale that would put an end to the nine-year merger of Daimler-Benz AG and the former Chrysler Corp.
DaimlerChrysler officials stress that all options remain on the table.
Among the possible scenarios, the automaker may retain a minority stake of 20 to 30 percent in Chrysler, said the people familiar with the sale talks.
They said top managers are intent on working out a smooth and rapid deal to minimize management defections and disruption at Chrysler and its dealerships.
"We want the best solution for the Chrysler Group, and for DaimlerChrysler," said one company official who spoke on condition of anonymity.
Company officials would not comment for the record on the negotiations, but privately they say management has come under mounting pressure from investors, German labor representatives and Mercedes-Benz managers and workers who are increasingly dissatisfied with the merger.
Lense is against Chery deal
With Chrysler embarking on its second restructuring in seven years, many DaimlerChrysler employees in Germany question whether the Stuttgart-based automaker can restore the American carmaker to sustainable profitability.
A company can only function well if all of its divisions are healthy, Lense said. "You can't have one part where you're constantly expecting losses," he said. "That is a burden on the whole company."
Lense, the chief employee representative of the huge Untertürkheim plant in Stuttgart, where DaimlerChrysler builds engines, suspensions and transmissions for Mercedes-Benz cars, attributed Chrysler's difficulties largely to its reliance on light truck sales, which account for two-thirds of revenues. That is a structural problem, he said, which cannot be resolved only by cutting production capacity. He said Chrysler needs to balance out its model range, and offer more small cars with fuel-efficient engines.
He said Chrysler may need partners to share development costs, although he, like the other employee representatives on the DaimlerChrysler board, opposed a recent deal to have China's Chery Automobile produce subcompacts for Chrysler. "Chrysler won't improve its image by selling what are effectively Chinese cars," he said.
While Lense appeared wary of financial bidders, preferring manufacturers with experience running a big business, he sounded lukewarm about GM. "I don't know if GM, in particular, is a good example," he said, when asked if he would favor a deal with the U.S. auto giant.
As for private equity bidders who would carve out "the filet," then resell Chrysler in a few years, "this is something we would not support," he said.
DaimlerChrysler officials declined to discuss potential bidders, or their selection criteria, but one insider said the company had set conditions in recent deals with private equity firms, such as the sales of MTU Aero Engines and the company's off-highway engines unit, which included part of Detroit Diesel.
In selecting buyers, "the main criteria were, what does that particular investor want to do with the company? What is their strategy? How would they deal with the work force?" said the official, who spoke on condition of anonymity.
What's Chrysler's worth?
Estimates of Chrysler's value vary but many analysts calculate roughly that the U.S. automaker's liabilities cancel out the worth of its assets. "You don't have value when you take the liabilities into account," one analyst said.
Potential bidders may be interested primarily in a few select assets, such as Chrysler's world-renowned Jeep brand.
But Zetsche said last week that it would not make sense to sell Chrysler in pieces because of the integrated production of Dodge, Chrysler and Jeep vehicles. Zetsche, who ran Chrysler for nearly five years, said that as the management reviewed Chrysler's role within DaimlerChrysler in recent months, it took into consideration the United Auto Workers union's refusal last year to offer Chrysler the same health-care concessions it had given GM and Ford Motor Co.
On Thursday, in a meeting with investors arranged by Deutsche Bank, Zetsche said the UAW was treating Chrysler as a subsidiary of a wealthy parent, according to people familiar with the presentation.
DaimlerChrysler sources say Chrysler's legacy costs, notably its health care liabilities totaling $18 billion, were not the main reason that the company was reconsidering the merger.
The biggest concern, they say, is the U.S. automaker's uneven operating performance and the brutal competition among manufacturers in the high-volume segments of the American market.
Willi Diez, head of the Auto Industry Institute near Stuttgart, said Chrysler's problems stand out now because the rest of the company is running smoothly.
"The problems at Mercedes are being solved. Mercedes is profitable. The problem of Smart has been solved. Trucks are profitable. Everything runs well at the core business except Chrysler," Diez said. "The shareholders want to earn money. They have no patience."
"The lesson for German manufacturing is that they should focus on their own business," he said, pointing to the success of BMW AG after the Bavarian carmaker sold Rover Cars in 2000.