Talk about Chrysler?s sale heats up. Just after several days from DaimlerChrysler AG?s revelation of the Project X restructure plan and the announcement that it is considering all options for the Chrysler Group division invited a number of investors willing to purchase the ailing American automaker. Some reports are pointing to General Motors Corp as a potential purchaser.
The possibility of a sale has fascinated different markets since the Wednesday announcement, which has eventually placed the Auburn Hills automaker on the auction block. Daimler is reported to be having talks with GM about a possible sale of Chrysler. Additionally, the undisclosed private-equity funds also expressed their desire to acquire the company. Both Daimler and GM declined to give comment on the reports. However, critics in the industry are saying that an outright sale of Chrysler to GM is not a likely scenario. But no one could deny the fact that the potential sale of Chrysler is heating up quickly that even the Volant cold air intake could not suppress such a height in temperature.
JP Morgan Chase & Co., DaimlerChrysler’s investment banker, was reported to be tapping its London-based mergers-and-acquisitions specialist Lawrence Slaughter to lead efforts to sell Chrysler. JP Morgan officials were spotted at Chrysler’s Auburn Hills headquarters last week. The said firm is anticipated to issue a prospectus to potential purchasers fairly soon.
DaimlerChrysler shares increased some 4.4 percent to $73.33 in heavy trading on the New York stock exchange on Friday. Said stock has accumulated a 13.8 percent increase in a matter of three days and at a seven-year high. However, the potential deal with GM was less fervent. GM shares have decreased 10 cents to close at $36.34 on Friday. According to critics, for GM to purchase Chrysler would just mean a slower recovery.
Though there are reports that link the two automotive giants, details are limited. Automotive News reported Friday that DaimlerChrysler and GM were engaged in “high-level” talks. Dow Jones Newswires, on the other hand, reported that the companies have “at least discussed the possibility of GM buying Chrysler.”
Germany’s Manager magazine was the first to report that GM Chairman Rick Wagoner and DaimlerChrysler CEO Dieter Zetsche had discussed a Chrysler deal. The magazine said Chrysler’s huge health care liabilities were a key issue that would have to be resolved. When asked to comment on the reports, a DaimlerChrysler spokesman declined. But Lutz commented via email. “We won’t even confirm or deny the rumors,” Lutz said.
Chrysler and GM have been in talks to produce large sport utility vehicles together. But according to analysts, to create a full-fledged union of the companies would be burdened with loads of challenges. “It’s an idea that comes from out of the blue, but it’s not impossible,” said David Cole, director of the Center for Automotive Research in Ann Arbor. “The biggest issue is the pension and health care liabilities.”
Both GM and Chrysler are struggling to cope with declining shares in the market, high production costs, and overcapacity. As such, to merge them could create federal anti-trust issues. “The product redundancies are huge,” said George Magliano of the research firm Global Insight. “They have a very heavy dependence on big trucks. They have similar deficiencies in the car lineup.”
Craig Huston, an analyst with the Gimmer Credit bond research firm said, “For GM — which hasn’t exactly shown great skill in managing its own business — to go out and buy a struggling automaker doesn’t get me all warm and fuzzy.” The long-awaited GM turnaround is now gaining acceleration but hasty decisions could curtail its flow. Analysts added that the purchase of a slumping rival could risk GM’s recuperation.
“These are rumors and I hope, by God, GM wouldn’t do anything like this,” said Klaus Franz, a deputy chairman of Opel’s supervisory board. “We are on the right way to come back on track with the right products.”