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Speculation swirls about Chrysler's fate, driving stock ever higher

Speculation swirls about Chrysler's fate, driving stock ever higher

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 percent since it first said it was mulling all options for the Chrysler Group. On Monday they gained almost 4 percent more to euro56.26 (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 percent of its work force, and shutter a plant in Delaware in a bid to shave costs.
DaimlerChrysler's fourth-quarter earnings plunged 40 percent on weaker demand at the Chrysler unit, where sales fell 7 percent. Chrysler lost about US$162.8 million (euro124 million) in the fourth quarter and had an operating loss of euro1.12 billion (US$1.46 billion) for the year, compared to a profit of euro1.53 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 The 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 (euro3.81 billion to euro10.43 billion), depending on factors that include pension liabilities, health care obligations and fair value for plants and material.
In contrast, Daimler-Benz AG paid US$36 billion (euro27.41 billion) for the American icon in 1998.
The Times of London reported on its Web site Monday that U.S. investment bank JPMorgan Chase & Co. would start a 7 billion pound (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 Feb. 14 announcement.
The Wall Street Journal, meanwhile, reported that DaimlerChrysler 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 Co., 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.
Yves Milliere, who follows the French auto industry for London-based Global Insight, said a tie-up with Renault SA might make sense, at least for the French automaker.
"I would keep options open when it comes to Renault," he said, adding that the Chief Executive Carlos Ghosn, who also oversees Japan's Nissan, could use Chrysler as a way to enter the U.S. market and introduce its models there using Chrysler's manufacturing and sales networks.
"There are some synergies there," Milliere said.
Renault did not comment when called.
German automakers Volkswagen AG, Europe's largest, and BMW AG, already have their own markets in the U.S.
Stephen B. Cheetham, European auto analyst for Sanford Bernstein Ltd. in London, said Ford Motor Co. and General Motors Corp. could be interested, but given their own precarious financial states, would be unlikely to convince shareholders in favor of such a deal.
"(We) see significant synergies with Ford, but its new CEO probably prefers a solo turnaround _ at least thus far," he said. "GM is unlikely to be interested, while vehicle designs and U.S. market access are attractive to an Asian buyer _ but its unionized cost base is not."
GM and Chrysler officials would not comment Friday on a report by Automotive News that they were in talks.
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Updated : 2021-10-16 10:45 GMT+08:00