Posted by: David Kiley on September 24, 2008
Cerberus bought its controlling stake in Chrysler in 2007. Since then, sales at the automaker have precipitously dropped, auto industry sales on the whole have slipped to levels not seen since the 1980s and the forecast for sales and the U.S. economy next year is at least as bleak as this year.
Maybe it is a time to buy.
This statement from Cerberus: “Cerberus confirms that it has approached Daimler about the possible redemption of its 19.9 percent stake in Chrysler. We are currently in discussions. In the event of a successful transaction, all existing industrial relationships between Daimler and Chrysler would continue.”
There are two big reasons for Cerberus to buy the remainder of Chrysler: First, the price will probably never be lower from Daimler, which would like to have the automaker completely off its books. Second, a potential buyer for Chrysler (Renault-Nissan or even a Chinese auto maker), would rather not have Daimler muddying up any negotiations.
By buying the rest of Chrysler, there would be less pressure on Cerberus to offer any financial guidance to the marketplace about revenues or earnings. Because Daimler is publicly traded, the German automaker has to report the progress of its stake in Chrysler. Each quarter and at the end of the year, analysts and media are left to extrapolate those numbers for all of Chrysler.
Daimler-Benz acquired Chrysler in 1998, but endured nearly a decade of heavy losses and distraction before selling it off to Cerberus last year.
Chrysler is in two major deals with Nissan: one that has Chrysler supplying Nissan with a version of its Ram truck that Nissan dealers can sell in a few years; and one in which Nissan will supply to Chrysler a small car based on its Versa subcompact. Sources inside Chrysler, as well as outsiders who are close to management, have said in recent weeks that they would put the chances of an acqusition of Chrysler above 50%. Several point to Renault-Nissan as a logical acquirer, or the automaker most likely to take a large equity stake.