Chrysler buyers ready; renaming asked
Canadian parts maker Magna International Inc., another potential suitor, reportedly puts the value at $4 billion.
Big-name private equity firms Blackstone Group and Cerberus Capital Management have emerged as the leading contenders to buy the Chrysler Group, KeyBanc Capital Markets analyst Brett Hoselton said in a note issued Tuesday.
In a sign of how much pressure is building in Germany against the troubled unit, two shareholders are calling for Chrysler to be dropped from the company's formal name by March 31, 2008, if Chrysler isn't sold first.
"Maintaining 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," wrote shareholders Ekkehard Wenger and Leonhard Knoll in a proposal to amend the company's articles of incorporation at the annual meeting April 4 in Berlin.
"This is all the more true as unflattering nicknames such as Doting Daimler, Daimler-Crisis or even Crime-ler have long been in circulation."
Worldwide speculation has engulfed the Chrysler Group ever since last month when DaimlerChrysler CEO Dieter Zetsche refused to rule out selling the U.S. unit.
Bids for the Chrysler Group are expected to be submitted by the end of the month, the Wall Street Journal has reported. Officials from Blackstone, Cerberus and Magna reportedly met individually with Chrysler Group brass last week, reviewing the company's finances and plans.
Hoselton said that Magna is interested in becoming a partner or minority owner in Chrysler -- with the Canadian company owning as much as 40% of the automaker.
Under this scenario: The company would partner with a private equity firm that would have a majority stake while Magna would be responsible for running Chrysler. Under a potential deal, it's believed that Magna would have an option to purchase an additional 10% to 20% of Chrysler from the private equity firm within as short a time as 18 months, giving the firm an exit strategy.
However the likelihood of such a proposal happening is lessened, Hoselton said, in part because of Magna's lower assessment of Chrysler's value vs. the private equity firms' opinions.
In addition, Hoselton, citing unnamed sources, said that Magna's meeting with Chrysler March 9 "was more about MGA playing defense now as opposed to offense."
"Private equity buyers do not necessarily need MGA's operational expertise," Hoselton said. "We believe Chrysler's former chief operating officer, Wolfgang Bernard, could offer a buyer the same benefits given his understanding of the automaker's problems and the tenacity with which he attempted to turn around Volkswagen."
The Financial Times of London, citing unnamed sources, reported Tuesday on its Web site that Bernhard, who had a large role in Chrysler's previous turnaround five years ago, has signed an "advisory contract" with Cerberus.Magna Chairman Frank Stronach confirmed to a Canadian newspaper last week that his company was looking into Chrysler but noted that it was too early to say if his company would end up making a bid.
Also on Tuesday, UAW President Ron Gettelfinger, who has said he is working to prevent a sale, said that he's not ready to give up. "I've been around this process long enough to know that I'm not ready to concede that the Chrysler Group is going to come out of DaimlerChrysler," he said on WJR-AM radio.
Gettelfinger, who sits on DaimlerChrysler's supervisory board, was asked if he would prefer a company already in the auto industry, such as Magna, to purchase Chrysler as opposed to a private equity firm. "It does make sense that it stays in the auto group," he said. Later Gettlefinger noted: "Not all equity firms are bad -- I might add."
Under the proposal to change DaimlerChrysler's name, the unhappy shareholders are proposing the name be changed to Daimler-Benz AG.
"The disadvantages this entails for shareholders, customers and employees can only be borne at most for a short transition period until there is a proper separation from Chrysler," they wrote of the current name and its reputation. "If a proper separation cannot be effected within one year, this would only serve to underscore the need to remove this affliction on the image from the corporation's name."
The group also proposed a slew of other changes and actions, including an investigation into whether former DaimlerChrysler Chairman Juergen Schrempp should be held financially liable for comments he made to the Financial Times regarding the motivations of the deal that brought Daimler-Benz and Chrysler Corp. together in 1998.
The company's supervisory and management boards oppose the name change and other proposals by the shareholders. "The DaimlerChrysler name is established all over the world," the company said in a statement. "There are no grounds to change the name of the corporation."
-- The credit belongs to the man who is actually in the arena; whose face is marred by dust and sweat and blood; who strives valiantly; who errs and comes short again and again; who knows the great enthusiasms, the great devotions and spends himself in a worthy cause. Who at the best, knows the triumph of high achievement; and who, at the worst, if he fails, at least fails while daring greatly. T.R. April 10, 1899