Chrysler still in limbo
BY MARTON PETTENDY | 11th Nov 2008
According to Reuters, the South Korean car giant has held talks with the owner of Chrysler LLC, Cerberus Capital Management LP, about the potential buy-out of Chrysler’s iconic off-road brand and other possible assets.
It is understood Cerberus would prefer to sell Chrysler intact, but if its is broken up Automotive News has reported that Nissan-Renault may consider buying its Ram pick-up truck production while Volkswagen is a possible buyer for Chrysler’s (Voyager) people-mover business.
Chrysler, Jeep and Dodge sales in the US have plummeted by 26 per cent to the end of October this year, and with an 11 per cent market share the Chrysler group is in danger of being overtaken by Honda.
Some US reports have cited senior Chrysler executive sources as raising concerns about the company’s ability to finance its operations beyond the first half of 2009.
Hyundai holds a three per cent share of the US market and wants to become a full-line car-maker. It is understood talks between the company and Ford ended after the pair disputed the value of the Volvo brand it was considering buying.
Ironically, DaimlerChrysler sold its 10.5 per cent stake in Hyundai in 2004, three years before the company sold Chrysler to Cerberus in 2007, when its name became simply Daimler AG.
Hyundai’s US headquarters is located outside Los Angeles and it also has an engineering centre in Detroit and a new $US1.1 billion plant in Alabama, where its Kia subsidiary also plans to open its own plant in 2009.
Though it is alleged to involve only part of Chrysler LLC, the Hyundai deal appears more likely to attract federal financial assistance than GM’s Chrysler bid, which failed to attract a $US10 billion government loan because of the massive job losses it would have involved.
The previous day (November 7), GM revealed within its third-quarter financial statement that it had “set aside” the potential purchase of Chrysler.
“GM has recently explored the possibility of a strategic acquisition that it believed would generate significant cost reduction synergies and substantially strengthen GM’s financial position in the medium and long term, while being neutral or modestly positive to cash flow even in the near term,” said the statement.
“While the acquisition could potentially have provided significant benefits, the company has concluded that it is more important at the present time to focus on its immediate liquidity challenges and, accordingly, considerations of such a transaction as a near-term priority have been set aside.”While he also neglected to mention Chrysler specifically, GM CEO Rick Wagoner confirmed the end of talks with its fellow Detroit car-maker during a media phone conference the same day.
“We have recently explored the possibility of such an acquisition based on the analysis that it would strengthen our industry position in the long term,” said Mr Wagoner.
“We’ve concluded at this particular time that we are better off to put 100 per cent of our efforts on the liquidity side. We’ve set aside such (acquisition) actions as a near term priority.
“We frequently discuss matters of mutual interest with other auto manufacturers and, as a matter of policy, we generally do not comment on these private discussions, which in many cases, do not lead anywhere.”Chrysler CEO Bob Nardelli included the GM statement in a note to employees, which added: “As we have previously stated, Chrysler LLC neither confirms nor discloses the nature of its private business meetings, as many times they do not come to fruition.
“Returning Chrysler to profitability continues to be the key focus of the management team. We are significantly challenged by today's economic environment and by the automotive industry's unprecedented downturn.
“As an independent company, we will continue to explore multiple strategic alliances or partnerships as we investigate growth opportunities around the world that would aid in our return to profitability.”
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