DCX Considers Swapping Chrysler for Stake in GM
FRANKFURT, Germany February 25, 2007; Matt Moore writing for the AP reported that General Motors Corp. reportedly may be interested in giving an equity stake to DaimlerChrysler AG in exchange for its struggling Chrysler unit. Separately, an analyst said he understands a large Canadian auto parts supplier may be studying a Chrysler purchase.
Russia's second-biggest automotive company denied that it was interested in the Chrysler business.
The speculation about possible deals for Chrysler is the latest that has surfaced since DaimlerChrysler Chairman Dieter Zetsche said Feb. 14 that all options are on the table for the money-losing Chrysler business and he would not rule out a possible sale.
The Financial Times reported Monday that DaimlerChrysler was considering a 20 percent stake in GM in the form of a payment if a deal to sell Chrysler were to go forward.
The Financial Times, citing people familiar with the situation, said DaimlerChrysler was weighing the possibility of trading Chrysler for the GM stake, but added it was also considering a cash sale to private equity firms, including Apollo Management LP, Blackstone Group, Cerberus Capital Management LP and Carlyle Group, among others. All four have refused comment.
DaimlerChrysler did not comment on the report, reiterating its previous stance that all options for Chrysler are being considered. GM also said it would not comment on what spokesman Tony Cervone called speculation.
Also on Monday, KeyBanc analyst Brett Hoselton said in a note to investors that his sources tell him Magna International Inc. is seriously considering a purchase of Chrysler Group. Hoselton said senior Magna executives have obtained Chrysler financial information, visited Chrysler facilities and met with United Auto Workers leadership.
A Magna spokeswoman would not comment on the report, but confirmed that Chairman Frank Stronach has met with DaimlerChrysler Chairman Dieter Zetsche. However spokeswoman Tracy Fuerst would not say when the meeting took place.
She said Stronach and other Magna executives meet with auto company executives regularly as part of their normal course of business.
Fuerst would not comment on reports that the meeting took place on Feb. 14, the day DaimlerChrysler announced that it was seeking partners for Chrysler.
Hoselton also said in his report that he thinks a Magna purchase of Chrysler is possible but unlikely.
On Friday, a senior Chrysler official told The Associated Press that the company is giving detailed financial information to selected potential suitors and is working with its investment bank, JPMorgan Chase & Co., to avoid divulging sensitive information.
Meanwhile, Russia's second-biggest automotive company, OAO Gaz Group, shot down a report in German weekly magazine Focus that it was interested in acquiring Chrysler.
The magazine, citing no sources, said that Gaz, which receives four-cylinder engines from Chrysler for the Russian company's cars and minivans, was interested in Chrysler.
On Monday, Gaz said it had no interest in a deal for Chrysler. Volkswagen AG, the Renault-Nissan auto alliance and Hyundai Motor Co. have previously said they had no interest in the division.
Analysts said an equity deal would benefit GM given that a domestic tie-up would be easier for Chrysler instead of a foreign buyout.
"Since GM is short of cash, an equity deal would make sense if it is interested in Chrysler, and an equity valuation of Chrysler at, say, 3 billion euros ($3.94 billion), would wind up giving DaimlerChrysler a 20 percent stake in GM," said Stephen Cheetham, a senior analyst with Sanford C. Bernstein Ltd. said.
"This kind of deal has some face-saving potential for management, and we believe that from a shareholder perspective, 20 percent of a combined GM/Chrysler entity is preferable to owning Chrysler outright," said Cheetham. "However, it does not give DaimlerChrysler a clean break from equity exposure to the troubled world of U.S. domestic carmakers, and we would expect the presence of a GM stake to be an ongoing irritant in (its) relations with investors."
DaimlerChrysler's U.S. shares fell 35 cents to close at $70.57 on Monday on the New York Stock Exchange. GM stock fell 29 cents to finish at $33.97 on NYSE.
Chrysler earlier this month announced it lost $1.475 billion in 2006 and said it expects losses to continue through 2007. Parent DaimlerChrysler, however, earned $4.26 billion in 2006.
The news was accompanied by plans to shed 13,000 jobs, including 11,000 production workers and 2,000 salaried employees as it trims expenses and factory capacity to match declining sales. The automaker also announced the closure of one plant and layoffs at several others.
AP Business Writer Tom Krisher in Detroit contributed to this report.
DaimlerChrysler AG: http://www.daimlerchrysler.com
Chrysler Group: http://www.chrysler.com