DaimlerChrysler considering sale of Chrysler division

[PatS....]

DaimlerChrysler considering sale of Chrysler division

GREG KEENAN

Globe and Mail Update

POSTED AT 12:40 PM Wednesday, February 14

DaimlerChrysler AG is considering selling its money-losing Chrysler division and undoing the largest merger in auto industry history.

The announcement came as the Chrysler Group said it will cut more than 13,000 jobs, or 16 per cent of its work force, as part of its long-awaited restructuring plan, including 2,000 jobs in Canada.

About 1,650 jobs will be eliminated in Windsor, Ont., and another 350 in Brampton, Ont.

“No option is being excluded in the interest of arriving at the best possible solution for the Chrysler Group,” DaimlerChrysler said in a statement Wednesday ahead of the release of full-year financial results and the restructuring plan for the troubled U.S.-based division.

DaimlerChrysler chairman Dieter Zetsche said later, at his company's annual news conference, that the Chrysler team had “worked out a comprehensive recovery and transformation plan using all resources within DaimlerChrysler.

“In addition to that and in order to optimize and accelerate the presented plan, we are looking into further strategic options with partners beyond the business co-operation partners mentioned. In this regard, we do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler,” he said.

The company added that far-reaching options are being considered by the DaimlerChrysler supervisory board to assist in the restructuring at Chrysler, including finding a partner for the division.

Beyond that, Mr. Zetsche said he could not provide further detail “at this point in time.”

Tom LaSorda, president and chief executive officer, said the Chrysler group had an operating loss of $1.5-billion (U.S.) in 2006, compared with an operating profit of $2.024-million a year earlier.

“The status quo is clearly not acceptable,” Mr. LaSorda said.

The company's “recovery and transformation plan” is aimed at a return to profitability by 2008, with a goal of a 2.5-per-cent return on sales by 2009, Mr. LaSorda said.

“There are two integrated parts to the plan: first, the Chrysler Group needs to solidify its position in the North American marketplace. In addition, the key to our long-term success will be our ability to transform the organization into a different company to achieve and sustain long-term profitability,” he said.

The program will be supported by a $3-billion (U.S.) investment in new engines, transmissions and axles, which will set the table for “a product offensive of more than 20 all-new and 13 refreshed vehicles from 2007 to 2009,” the company said.

The company will reduce capacity by 400,000 units and — in addition to reducing the workforce and eliminating shifts — the Chysler group will reduce the number of dealerships and outsource or sell “non-core” business operations, Mr. LaSorda said.

The deliberations on the unit's future indicate that senior management at DaimlerChrysler have backed down from their robust defence of Chrysler, which merged with Daimler-Benz AG in 1998 to create the world's fifth-largest auto maker.

Since then, despite years of criticism from investors — which has arisen again in recent months amid the troubles at the third-largest U.S. auto company —DaimlerChrysler officials have insisted that separating Chrysler has never been an option.

The change in philosophy comes after the division was blindsided by the sudden rise in gasoline prices, which sent sales of sport utility vehicles and pickup trucks plunging in the U.S. market.

That led to the operating loss for the Chrysler group. Despite that loss, DaimlerChrysler as a whole reported operating profit of $7.3-billion, compared with $6.8-billion in 2005.

Mr. Zetsche said the recovery plan will involve special charges, but that the operating loss in 2007 should be lower than the loss posted in 2006.

The restructuring plan will reduce the payroll by 13,000 employees, close the assembly plant in Newark, Delaware, eliminate shifts elsewhere and reduce total capacity by 400,000 units over three years.

The redesigned business model includes greater emphasis on fuel-efficient products, global growth and partnerships, the company said.

The losses at Chrysler were offset by what the company called a substantial improvement in profit at Mercedes Car Group, as well as the company's heavy truck division and its financial services unit.

The company blamed the Chrysler loss on “the continuing difficult market environment” in the United States and a shift in consumer demand to smaller, more fuel-efficient vehicles.

The gas price increase in the U.S. market sent sales of pickup trucks and sport utility vehicles skidding and led to temporary fourth-quarter production cuts at many of Chrysler's North American assembly plants.

Chrysler has several new, smaller vehicles targeted to take advantage of the shift in demand, but some of them did not reach full production until late last year and some are just going into production now.

[thedahmer]

I saw that on the news and they were talking that Chrysler could be bought for a mere $20 BILLION-- ok so there are 500 members here on the forum that is $40 million each!!! Hey Don Coatney I think we could come up with that much-- wadda ya think?

[Don Coatney]

I can see 40 million from the desk I am sitting at but I just cant lay my hands on it.

[thedahmer]

Don, is there any way you could take a picture of $40 million just so I can see whatit looks like??

[Don Coatney]

No cameras allowed. But if this picture displays this is what a cash bus looks like. If full of hundred dollar bills you would be looking at 52 million. Follow this link for more pictures.

http://www.frbatlanta.org/atlantafed/visitors_center/tour/e1.cfm

[Plymouthy Adams]

Thanks Don..I knew I left that somewhere..glad you found it..take 10 percent finder fee and send the balance back to me...thanks...

[Guest 51plymouthod]

When you rich guys buy Chrysler, bring back the Plymouth & DeSoto brands...rear-wheel drive, Hemi V-8s...

[Jim Saraceno]

So maybe Iococca and Kerkorkian can make another bid for Chrysler again. That's if Kirk isn't too busy trying to screw up GM.

If you ever want to read the story behind the Daimler-Chrysler "merger", read the book "Taken for a Ride". It's quite a story.