DaimlerChrysler Stock Price Jumps as Law Suit Fears Fade

FRANKFURT, Dec 4, 2003; Reuters is reporting that DaimlerChrysler shares jumped five percent on Thursday as overnight testimony at a U.S. trial boosted hopes the car maker could win the case and brought investors back to a stock they have recently neglected.

"The stock broke through, technically-speaking, first thing today and that's helping people realise all of a sudden that it is underrepresented in their portfolios," said one trader at a major German bank.

Shares in DaimlerChrysler, which have underperformed the blue-chip DAX by 12.6 percent so far this year and undershot fellow German car firms by 9.2 percent were 4.7 percent higher at 34.21 euros by 1205 GMT.

News out of the U.S., where billionaire investor Kirk Kerkorian is suing the German-American car giant over the 1998 link up between Daimler-Benz and Chrysler, was one of several catalysts for the stock traders and fund managers said.

In a setback to Kerkorian's battle for more than $1 billion in damages, a former senior Chrysler official told a court in Wilmington that he backed the deal creating DaimlerChrysler and believed it was intended as a merger rather than a takeover.

"There's a growing sense that before long there will be an outcome to the case between DaimlerChrysler and Kerkorian and that's removing some of the uncertainty around the stock," said another Frankfurt-based trader.

Investors were also taking a brighter view on the sector as a whole he said, pointing to Wednesday's rally for U.S. auto stocks led by General Motors which rose 5.2 percent after Goldman Sachs said GM was closing a hole in its pension funds.

"It's a long-term factor but it could be argued that yesterday's Goldman Sachs note on GM reminded investors about the potential improvements in Daimler's own pension funds," said one analyst.

CSFB said in a research note on Thursday that higher stock markets should boost the value of DaimlerChrysler's pension fund, while increases in interest rates could also "sharply reduce liabilities and improve stock value."

Upbeat comments from sportscar maker Porsche on Wednesday and a rise in U.S. car sales in November had also calmed fears that the strong euro could damage European exports, traders said, helping lift shares in peers such as Volkswagen which was 1.6 percent higher at 43.77 euros.