Shareholders urge divorce from Chrysler
Only one theme is expected to dominate DaimlerChrysler’s annual shareholder meeting this week: How soon can the U.S. Chrysler Group unit be sold off, and when can the company go back to being Daimler-Benz?
But despite boisterous calls by shareholder groups that want to see the German-American automaker carve off its U.S. counterpart and become completely German again, those looking for the answers are likely to go away disappointed.
Although the company has not confirmed that it is in talks to sell off Chrysler, for which it paid about $36 billion in 1998, speculation has run rampant that a deal is in the offing. Most analysts, however, do not believe any announcement will come at Wednesday’s meeting in Berlin, where about 8,000 shareholders will pepper the board with questions and comments.
“This is an unlikely venue for such an announcement,” said Stephen B. Cheetham, a research analyst for European autos with Sanford C. Bernstein Ltd. in London. “They will not normally be tied to the timetable. It’s highly unlikely that we will get an announcement for this meeting.”
In a filing with the Securities and Exchange Commission last week outlining the meeting, there was no motion to consider the sale of Chrysler, which has been under discussion since DaimlerChrysler Chief Executive Dieter Zetsche said Feb. 14 that all options for the unit were on the table.
At least some of the company’s more than 1 million shareholders have been pushing for a divorce from Chrysler both in style and substance.
Ekkehard Wenger and Leonhard Knoll have put forth a motion calling for the company to revert to its original name, Daimler-Benz. They contend that to “maintain 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.”
But the big issue will be what to actually do with Chrysler.
Holger Rothbauer, a member of KADC Critical Shareholders-DaimlerChrysler, which opposed the 1998 acquisition, said he suspected that Zetsche made his February announcement as a way to stem shareholder dissent at the annual meeting.
“I think they tried to do everything at the moment, especially in terms of Chrysler, to pacify people because they assume that there would be a major outburst at the shareholder meeting,” Rothbauer said.
Although he opposed the merger, Rothbauer said he was against selling Chrysler now because it was undervalued. Instead, he wants to see the unit fixed and then disposed of for a bigger gain.
No matter when Chrysler is sold, if ever, Daimler is unlikely to make back what it paid. Analysts value the unit from nothing to $13.7 billion.
Estimates vary with the value placed on assets such as brand names, factories and materials, all weighed against Chrysler’s estimated $19-billion liability to pay healthcare benefits for unionized retirees.
Some analysts say the liability exceeds the value of the assets, meaning that DaimlerChrysler would have to pay someone to take Chrysler. Others say the company is worth more to the right buyer.
So far no clear buyer has emerged, but Canadian auto-parts supplier Magna International Inc. has reportedly submitted a bid to buy Chrysler for $4.6 billion to $4.7 billion. Major private equity firms Blackstone Group and Cerberus Capital Management also are rumored to be in the hunt after both perused Chrysler’s books during a visit to its Auburn Hills, Mich., headquarters in February.
