One bidder left for Chrysler?

Posted by: Gail Edmondson on May 7, 2007

Ever since Chrysler has been on the block, my sources have cautioned that the company is not worth a penny if the buyer takes over Chrysler’s sizeable health and pension liabilities — estimated at around $20 billion. Instead DaimlerChrysler will need to offer a dowry to unload it’s unprofitable US unit. So if a bidder puts $5 billion on the table, for example, Daimler will have to help pay the lion’s share of the liabilities to clinch the sale.

That may prove an exaggerated claim, but interest in Chrysler seems to be plummeting. The latest buzz from German magazine Automobilewoche is that Canadian autoparts maker Magna is the only real bidder left — and that a preliminary announcement could come as early as this month. Private equity groups Cerberus and Blackstone which initially submitted bids are backing off, but DaimlerChrysler continues to negotiate with them for tactical reasons, AutomobileWoche reported.

If true, that certainly weakens the position of DaimlerChrysler. Magna is believed to be offering around $5 billion for Chrysler, together with Canadian investment fund Onex but it’s unclear how the health and pension liabilities would be handled. DaimlerChrysler continues to insist “all options are open.”

My guess: DaimlerChrysler CEO Dieter Zetsche will do the deal, eager to put the best face possible on a sale to Magna, even if the pricetag hurts.

Reader Comments

Hal Popplewell

May 7, 2007 12:54 PM

It would be smart to engage the U.A.W. in a "concessions-for-stock" deal to round out this deal. There are also very significant operational savings that could be gained through "forward looking" systems which could pare-back inventory cost, premium freight, yard holds / misbuilds, costs of last-minute changeovers, and improved supply chain efficiencies. Just a thought.
-- Hal Popplewell
CEO
AgentWare Systems, Inc.

Hal Popplewell

May 7, 2007 1:10 PM

It would be smart to engage the U.A.W. in a "concessions-for-stock" deal to round out this deal. There are also very significant operational savings that could be gained through "forward looking" systems which could pare-back inventory cost, premium freight, yard holds / misbuilds, costs of last-minute changeovers, and improved supply chain efficiencies. Just a thought.
-- Hal Popplewell
CEO
AgentWare Systems, Inc.

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