THE BID FOR CHRYSLER : Takeover Fight May Afford No. 2 Rival an Opportunity
One of Chrysler Corp.’s toughest competitors has smelled opportunity as the No. 3 auto maker tries to fend off an unwelcome takeover offer from billionaire investor Kirk Kerkorian.
Ford Motor Co. officials acknowledged Wednesday that their company could benefit if the buyout battle for Chrysler is prolonged and diverts management attention from car building and selling.
“To the extent that management of Chrysler is distracted, that probably would help our cause,” said Ford Treasurer David McCammon at a press conference to discuss the company’s 71% increase in first-quarter earnings.
Chrysler is attempting to fend off the $55-a-share buyout proposal from Kerkorian, who is its largest shareholder, and former company Chairman Lee Iacocca. The deal is valued at $22.8 billion.
The takeover proposal comes as the U.S. auto market is weakening and Chrysler is preparing to launch the 1996 redesign of its minivan, a vehicle that became a mainstay for the company and helped saved it from extinction in 1980s.
Ford and Chrysler are locked in a bitter battle for minivan dominance. In the past year, Ford’s Windstar, Aerostar and Mercury Villager have made strong inroads against Chrysler’s Town and Country, Dodge Caravan and Plymouth Voyager. Ford’s share of the minivan market share jumped from 23% to 34% while Chrysler’s fell from 45% to 36%.
Chrysler already has lost production of 33,000 minivans in the first quarter because of retooling and production glitches. Further delays could cost it dearly as top executives are focused on Kerkorian’s maneuvers.
“All of those things would appear to give us an opportunity,” said McCammon, who noted that Ford for the first time in several years made more money per vehicle in the first quarter than Chrysler.
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With the rebound of the U.S. auto industry in recent years, Detroit’s auto makers are thinking longer-term. The Big Three all have built cash reserves to fund product development and other needs in anticipation of the next cyclical downturn.
“I’m sure the concern by Chrysler is whether they would have the resources to withstand a major downturn,” McCammon said. “And if we were involved in that (a takeover), that would be my concern.”
Chrysler stock closed Wednesday at $46.25, down 50 cents in trading on the New York Stock Exchange. Ford moved up 62.5 cents to $27.75 on the strength of its earnings. General Motors Corp., which reports earnings today rose $1 to close at $44.
McCammon said auto stocks are undervalued because of the mistaken belief that a cyclical downturn has already begun. Although sales were weaker than expected for the first three months of 1995, he said it was just “a pothole on the road to further improvement.” He predicted sales would continue strong for the next three to four years.
Ford earned $1.55 billion for the first three months of 1995, contrasted with $904 million a year ago, when it took a $440-million charge for the sale of First Nationwide Bank. Sales increased 14% to $34.8 billion from $30.4 billion.
