DaimlerChrysler Break-Up Denied

Monday, January 15th 2001, 12:00 am

By: News On 6

FRANKFURT, Germany (AP) â€” DaimlerChrysler's biggest shareholder came to the automaker's support Monday after a British newspaper reported that heavyweight investors were pressuring for a breakup of the automaker's troubled merger.

DaimlerChrysler dismissed the report, and Deutsche Bank, which has a 12-percent share in the automaker â€” said it would stand behind chief executive Juergen Schrempp's plan to boost the loss-making Chrysler.

``Breuer said in December that he thinks the strategy is correct and that the management is capable of running the company,'' said Deutsche Bank spokesman Ronald Weichert of bank chairman Rolf Breuer. ``That stance hasn't changed.''

Weichert would not comment on the report's claim that the automaker had six months to shape up, but he said that Deutsche Bank was still looking to thin out its stakes in various industrial companies, including DaimlerChrysler, over the next two years.

``We have said in the long run that we will part with this investment, but we will do it only at an active price for us and our shareholders,'' Weichert said, adding that Deutsche Bank would not sell DaimlerChrysler with prices at their current lows.

DaimlerChrysler shares were trading flat Monday around 44 euros ($41.80) in Frankfurt trading after The Sunday Times of Britain reported that some of the Stuttgart-based company's biggest shareholders were giving Schrempp six months to either turn around its loss making Chrysler unit or break the company up.

DaimlerChrysler spokesman Thomas Froehlich called the report pure speculation, adding that the company has no plans to drop its U.S.-based unit.

``Chrysler is an important part of our corporate strategy and that still stands,'' Froehlich said.

Auto analysts said it is unlikely DaimlerChrysler would break up anytime soon. With Chrysler mired in red ink, few buyers would be interested in the company right now, they said, and its financial troubles also make it an unattractive buy if it were launched on the stock market as a spin off.

One solution could be dividing the company in two, giving each current stockholder one share each in two new companies that would correspond roughly to former Daimler-Benz and Chrysler, speculated Juergen Pieper, an auto analyst with Metzler Bank in Frankfurt.

``A split would be seen positively by the market because people fear that the losses at Chrysler will reach enormous figures, possibly into the billions, in 2001,'' Pieper said. ``But if this report is right, DaimlerChrysler has almost no chance to turn around Chrysler in just six months.''

A string of production cuts at Chrysler will likely hurt revenue, and Chrysler's fourth-quarter loss likely will run more than double its third-quarter loss of $512 million.

Deutsche Bank is the company's largest shareholder, but The Sunday Times also cited the Kuwaiti government as a disgruntled investor. Kuwait is DaimlerChrysler's second-largest shareholder with a 7.4 percent holding.

Pieper described the Kuwaitis as patient investors who were unlikely to be pressuring for a shake up.

Thomas Aney, an auto analyst with Dresdner Kleinwort Benson in Frankfurt, said the 1998 merger between Daimler-Benz and Chrysler Corp. simply needs more time and is in no danger of dissolving.

``We've heard this argument before, and we'll hear it again. I don't think they hold much water,'' Aney said.

DaimlerChrysler shares have lost nearly halve their value since hitting a post merger high in early 1999.