Deal Could Benefit Local Dealers and Consumers

Southern California consumers could benefit from a merger of Daimler-Benz and Chrysler Corp. if the German luxury-car maker passes its engineering and quality control standards on to Chrysler and Chrysler helps Mercedes jazz up its designs.

But little else about the possible combination of the two companies would affect their operations in the Southland, where both have big markets and a well-established chain of dealerships and support operations.

Chrysler and Mercedes dealers and other auto industry insiders in Southern California greeted news of the merger talks with enthusiasm Wednesday, calling the proposal surprising but eminently sensible.

“Chrysler gets Mercedes’ manufacturing help and a worldwide distribution network. Mercedes gets access to Chrysler’s expertise with minivans, pickup trucks and sport-utility vehicles,” said Keith Crain, chairman and publisher of Automotive News.

“One thing is clear though: Mercedes-Benz will be in control” if the deal goes through, he said. “They can call it a merger, but somebody is going to run it and [Chrysler Chairman] Bob Eaton’s not going to be it.”

If the deal goes through, Crain said, Chrysler will be “the North American subsidiary of Mercedes-Benz.”

That isn’t likely to affect the companies’ U.S. dealer networks--the part of the car business consumers see.

“When Ford bought Jaguar, Jaguar got a better car out of it, but there were no changes for the dealers,” said Rick Evans, owner of Huntington Beach Chrysler-Jeep-Hummer and president of California Motor Car Dealers Assn.

“And when BMW bought Rover, it had no impact on their dealers other than to improve the management of Rover. So what happens if Mercedes buys Chrysler? I think it’s a marriage that could improve the image and quality of Chrysler products,” Evans said.

Chrysler would gain ground if the deal is done “because Mercedes is known for quality, and that will rub off,” said Frank McClure, general manager of Center Chrysler-Jeep in Van Nuys. “The customer will get a better product.”

Mercedes-Benz also could benefit because “Chrysler is probably the best in car design right now” and could help the German luxury car maker refine the look of the cars it sells in the U.S., said Van Tune, editor of Motor Trend magazine.

But the thought that Detroit’s Big Three could soon be the Big Two is sobering to some. “It’s a little sad,” said South Bay Chrysler owner Marv Lazar, a 30-year Chrysler dealer. “For a big domestic car maker to lose its independence, that could have a lot of far-ranging implications.”

One of those that could benefit consumers is savings that help keep a lid on car prices as the two companies mesh their manufacturing and distribution systems, said Nickolas Shammas, whose Downtown L.A. Motors group sells both Mercedes-Benz and Dodge.

Both Mercedes and Chrysler count Southern California as an important market area--six of the largest Mercedes-Benz dealers in the United States are in Orange and Los Angeles counties, and consumers from Santa Barbara to National City have made Chrysler’s Jeep and Ram truck lines major sellers in the region.

Both companies’ regional headquarters are in Orange County--Mercedes-Benz in Costa Mesa and Chrysler in Irvine. Each has a design studio in the area--Chrysler Pacifica Design in Oceanside and Mercedes-Benz Advanced Design in Irvine.

While the administrative functions likely would be kept separate, the design studios could play off each other very well, said analyst Eric Noble of AutoPacific Inc. in Santa Ana.

“Chrysler is probably the leader in the U.S. in planning and designing vehicles for the North American market, but it is not nearly as good at building as designing,” Noble said. “And Mercedes has a well-deserved reputation for building rolling bank vaults. If you look at the combination, it makes sense. Mercedes would get design competency for the U.S. market; Chrysler would get improved quality.”

It would take considerable time, though, for most people to notice that the two companies had merged.

“The immediate visible impact would be very minor,” said Noble. When Daimler-Benz acquired Oregon truck maker Freightliner, “you did not see a dismantling of any Freightliner operations,” he said. “All you saw was sensitive new leadership and a lot of capital investment.”

If that is the case in a Chrysler-Mercedes merger, it would be good news for several thousand Southland residents who work in the two companies’ regional facilities and for the 132 Chrysler dealers and 24 Mercedes-Benz dealers in the region. Mergers often are accompanied by payroll reductions as overlapping operations and duplicative jobs are trimmed.

But Chrysler and Mercedes have almost no overlap in the U.S., said David Healy, automotive analyst at Burnham Securities.

A merger of the two won’t cause “a cascade of restructuring and consolidation around the world,” he said. “The product lines of the companies are entirely different--they’re like two ships passing in the night.”

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Auto Powerhouse

* Chrysler Corp. and Germany’s Daimler-Benz are reportedly ready to merge in a monumental deal. A1

* It has been a long, rocky road for Chrysler, the comeback kid of American industry. D7

* Car company mergers can be very difficult. Just ask Fiat. D7

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A New Car Club?

A merger of Stuttgart, Germany-based luxury car maker Daimler-Benz and Chrysler Corp., the No. 3 U.S. car maker, could help each company gain a foothold in the other’s markets. A combined company would have a 7.4% share of the worldwide automotive market.

Possible benefits for Daimler-Benz:

* Would dramatically expand Mercedes-Benz’s manufacturing and dealership operations in the U.S., the world’s largest and most profitable single auto market.

* Would create opportunities for joint development, at significant cost savings, of mass-market vehicles aimed at the North American consumer.

Possible benefits for Chrysler:

* Would boost Chrysler’s virtually nonexistent position in Europe and Asia, giving it new places to sell its minivans and other vehicles.

* Might gain from the luster of the Daimler-Benz name and its luxury car lines.

* Daimler’s engineering expertise may help improve car quality.

* Would create opportunities for joint development of vehicles aimed at European customers.

* Would give Chrysler the manufacturing base in Europe that it abandoned in the 1970s amid financial crisis.

Cross-ownership by U.S. competitors

* General Motors: Negotiating to buy as much as 50% of South Korea’s Daewoo Motors. Owns 50% of Sweden’s Saab and 37.5% of Japan’s Isuzu Motors and has a 3.5% equity in Japan’s Suzuki.

* Ford Motor: Holds 33% of Japan’s Mazda Motors. Owns 17% of South Korean auto maker Kia Motor with Mazda. Owns British manufacturers Jaguar and Aston Martin. Owns 70% of Taiwan’s Lio-Ho Moto and 30% of Malaysia’s Associated Motor Industries. Holds a 20% stake in China’s Jiangling Motors.

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“Anybody that doesn’t tell you this is a surprise is not being candid. Chrysler has had talks with BMW. This certainly was a different approach.” ADAM BAUM, analyst with automotive consulting firm IRN.

“The product lines of the companies are entirely different--they’re like two ships passing in the night. Immediately at least, there will be no synergies, no merger savings, no layoffs, no consolidations, no restructurings, because there’s no overlap.” DAVID HEALY, automotive analyst with Burnham Securities.

Sources: Times research, Ward’s Automotive International, Bloomberg News, wire service reports. Researched by JENNIFER OLDHAM / Los Angeles Times