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Daimler Set To Sell Chrysler Stake

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The Associated Press

Published: September 25, 2008

DETROIT - Germany's Daimler AG said Wednesday that it is in talks to sell its remaining stake in Chrysler LLC to private-equity firm Cerberus Capital Management LP.

Daimler spokesman Han Tjan confirmed a report in Germany's Manager Magazin that the company is in talks to sell the 19.9 percent it owns in the U.S.-based automaker.

Cerberus also confirmed the talks and said in a statement that if the transaction is successful "all existing industrial relationships between Daimler and Chrysler would continue." No further details were given.

Cerberus bought 80.1 percent of Chrysler from Daimler in August 2007 in a $7.4 billion deal. The sale ended a stormy nine-year partnership between Daimler and Chrysler, based in Auburn Hills, Mich. The companies have continued to share diesel engine and other technology.

Since Cerberus took control of the automaker, Chrysler has faced tough times. The U.S. economy and auto sales have slumped, and $4-per-gallon gasoline has sent consumers away from Chrysler's trucks and sport utility vehicles toward small cars, where Chrysler's lineup is thin. Sales are off 24 percent through August.

As a private company, Chrysler does not have to report its earnings, but reporters and analysts were able to calculate Chrysler's performance from Daimler's financial statements. Buying 100 percent of the company would make Chrysler's earnings completely private.

On Tuesday, top Chrysler executives told dealers the company has lost $400 million this year. Chief executive Bob Nardelli and Vice Chairman Jim Press used a satellite feed to address dealers in movie theaters nationwide for a presentation on the state of Chrysler's business and future products.
Chrysler spokesman Stuart Schorr would not comment on what was discussed with the dealers but said the company talked about its performance for the first half of the year.

"There was no new financial information announced yesterday," he said.

The Chrysler executives, according to a dealer who saw the presentation, did not state the time frame for the $400 million loss, nor did they say whether it was an operating or net loss. The dealer did not want to be identified because the meetings were private.

In a previous statement, Chrysler said it had lost $400 million in the first quarter.

Daimler has indicated through its own financial results last month that Chrysler lost an estimated $510 million in the first quarter. Chrysler lost $1.6 billion in 2007.

The presentations to dealers came just after Chrysler publicly unveiled three rechargeable electric car prototypes and promised to bring one of them to market in 2010.

Efraim Levy, senior industry analyst with Standard & Poor's, said in a note to investors that the value of Daimler's stake in Chrysler has dropped. He maintained a "Hold" recommendation on Daimler shares.

"Given the materially weakened automotive retail environment, sharply lower Chrysler sales volume, and decreased valuation for publicly traded U.S.-based automakers since the 2007 transaction, we think DAI's Chrysler stake is worth much less now than it was at that time," he wrote.

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