DaimlerChrysler Confirms In Talks About Chrysler

Wednesday, April 4th 2007, 7:27 am

By: News On 6

BERLIN (AP) _ DaimlerChrysler AG is confident a turnaround program at its Chrysler unit will return the beleaguered American brand to profitability, but Chairman Dieter Zetsche said Wednesday the automaker is in talks with unidentified potential buyers.

``As announced on Feb. 14, we are open to all options for future collaboration with Chrysler,'' he told some 9,000 shareholders crammed inside Berlin's exhibition center. ``The statement is still true today.''

He said that the talks have been with ``potential partners who have shown a clear interest'' and ``so far, I am satisfied with the process. Everything is going according to plan.''

He would not elaborate on who was involved in the talks.

Zetsche stunned the automotive world on Feb. 14 when he said that continued losses and fierce competition in the United States meant that the German-American automaker was considering all options for its Chrysler unit, and did not rule out a possible sale, saying only that all options were being considered.

He did not disclose whether any decision to sell Chrysler had been made or if the company was any closer to a solution. Still, he did say a recovery plan that will cut 13,000 jobs in the U.S. and Canada was moving forward.

The Chrysler unit lost $1.5 billion in 2006.

``The crucial factor was the unforeseeable shift in demand to smaller, more fuel-efficient vehicles which was triggered by increased gas prices in the U.S.,'' Zetsche said. He noted that Chrysler's strengths have been minivans, pickups and sport utility vehicles, autos not known for their fuel efficiency.

No clear front-runner has yet emerged to buy Chrysler, but Canadian auto-parts supplier Magna International Inc. reportedly has submitted a bid to buy the business for as much as $4.7 billion.

Cerberus Capital Management LLC and a consortium of investors led by Blackstone Group each have reviewed Chrysler's finances and are expected to make bids.

If DaimlerChrysler does sell off the U.S. unit, it will mark a significant change in fortunes since it bought Auburn Hills, Mich.-based Chrysler in 1998 for $36 billion.

Despite helping to keep the company afloat as little as two years ago when the Mercedes Car Group suffered massive quality control problems and declining sales, at least some of the company's more than 1 million shareholders have been pushing for a divorce _ in both style and substance.

Shareholders Ekkehard Wenger and Leonhard Knoll have put forward a motion calling for the company to revert back to its original name, Daimler-Benz AG.

They argued in their motion that to ``maintain a corporate name that evokes associations with the failure of the business combination with Chrysler is detrimental to the image of the corporation and its products.''

That in itself, however, would not resolve the question of what to do with Chrysler.

No matter when Chrysler is sold, if ever, Daimler is unlikely to make back what it paid. Analysts have valued the unit from between nothing to $13.7 billion.

The estimates vary with the value placed on assets such as brand names, factories and materials, all weighed against Chrysler's estimated $19 billion liability to pay health care benefits for unionized retirees.

Some analysts say the liability exceeds the value of the assets, meaning that DaimlerChrysler would have to pay someone to take Chrysler. Others say the company would be attractive to the right buyer.

Members of the Canadian Auto Workers, the United Auto Workers and German unions met Tuesday night for more than three hours to plan their strategies and reiterated that Chrysler should not be sold or, if it is, that any deal should not lead to major job cuts.

The unions will play a vital role in any deal involving Chrysler because their representatives account for half of the seats on DaimlerChrysler's supervisory board, the U.S. equivalent of a board of directors.

DaimlerChrysler shares started the day up more than 1 percent but then fell 0.23 percent to euro61.86 (US$82.63). Since Feb. 14, shares in the world's fifth-largest automaker have risen 27 percent.