Chrysler LLC's majority owner has approached Daimler AG about taking over the German auto maker's remaining stake in Chrysler. The move is aimed at clearing the way for the U.S. firm to seek closer alliances with other car companies, say people familiar with the matter.Daimler on Wednesday confirmed it is in talks with private-equity firm Cerberus Capital Management LP, signaling that the final unwinding of one of the business world's most celebrated mergers may be near. Daimler bought Chrysler in 1998 in a $36 billion "merger of equals" that sparked a flurry of automotive tie-ups, many of which proved unsuccessful.
Cerberus acquired 80.1% of Chrysler a year ago. Daimler's remaining 19.9% stake has emerged as a stumbling block for auto makers that could be interested in forming a global alliance with Chrysler, the people familiar with the matter said.
Any alliance would require Chrysler and a partner to exchange confidential information, such as product plans and sales projections, these people said. As a Chrysler shareholder, Daimler would have access to that information, a turnoff for potential partners, they said.
Cerberus may not have to pay Daimler for the stake. Cerberus took control of Chrysler in August 2007 in a complicated transaction in which Daimler essentially gave Chrysler to Cerberus. Cerberus agreed to invest $5 billion in Chrysler's auto operations and $1 billion in its finance arms.
Since then, Chrysler has continued to lose money and Daimler's earnings have been hurt by its share of Chrysler's losses. On Tuesday, Chrysler executives told dealers that the company had lost $400 million so far this year as sales have slid 24% in the first eight months. Daimler has written down most of the value of its Chrysler stake. In July, it valued it at €171 million (about $251 million), down from €1.4 billion a year ago.
It is unclear whether Chrysler has any potential partners prepared to engage in talks. Chrysler and Japan's Nissan Motor Co. have signed deals that call for Chrysler to assemble pickup trucks for Nissan and Nissan to make small cars for Chrysler. Those agreements led to speculation that the two could discuss a deeper partnership involving cross-shareholdings.
Nissan already has such an alliance with France's Renault SA, and Carlos Ghosn, who serves as chief executive of both of those companies and has said he is interested in adding a North American partner. In an interview this summer, Mr. Ghosn said Nissan hasn't had talks with Chrysler about expanding their relationship.
Chrysler confirmed the talks between Cerberus and Daimler but declined to further comment. News of the talks was reported by Manager Magazin, a German business publication.
The merger 10 years ago of what then was Daimler-Benz AG and Chrysler Corp. prompted other auto-industry deals, including General Motors Corp. linking with Fiat SpA, and Ford Motor Co. buying Jaguar and Land Rover -- alliances that were later unwound.
By: Edward Taylor and Neal Boudette
Wall Street Journal; September 25, 2008
