Report: Chrysler shopped to private equity
Four buyout firms among those being contacted about possible bids for DaimlerChrysler unit, newspaper says.
NEW YORK (CNNMoney.com) -- Four of the nation's largest private equity firms have been contacted about possibly buying Chrysler Group from DaimlerChrysler, according to a published report.
The Financial Times reported Friday that Apollo Management, Blackstone Group, the Carlyle Group and Cerebus Capital, as well as several European firms, have all been contacted about their potential interest in the troubled North American automaker.
On Feb. 14 DaimlerChrysler (Charts) executives said they would look at all options for Chrysler, including a possible sale or spinoff of the automaker that was acquired by Daimler-Benz in 1998. They also announced plans to cut 13,000 jobs and close plants to cut losses in North America.
Chrysler Group had an operating loss of $1.5 billion in 2006, even as the parent company reported a $7.3 billion operating profit.
There have been published reports that General Motors (Charts) has held talks about possibly acquiring its troubled rival. But more analysts and industry experts have discounted that possibility, especially since GM is also struggling to stem its own operating losses on its core North American auto operations. Neither GM nor DaimlerChrysler executives have commented on the reports of those talks.
Friday, Reuters reported that a spokeswoman for Volkswagen said the German automaker has no interest in buying Chrysler.
Investors also appeared to have discounted the likelihood of GM or other major global automaker buying Chrysler, as they lifted DaimlerChrysler shares far more than they have punished GM shares.
Still, some analysts have suggested that the three brands that make up the Chrysler Group - Chrysler, Dodge and Jeep, along with their dealership network - still have enough value to attract a buyer, even if it's not by another struggling automaker. And those expecting a sale have generally pointed to private equity firms as the most likely potential buyer, although some have also suggested a growing Chinese automaker might also consider a bid as a way of jumping into the lucrative North American market.
Private equity firms have shown a willingness to invest in troubled industrial companies. For example, Cerberus was one of the lead investors in a $3.4 billion investment in bankrupt auto parts maker Delphi announced in December. It also acquired a 51 percent stake in GMAC, the finance arm of General Motors, last year.
Carlyle was part of the consortium that bought the Hertz Global Holdings (Charts) from Ford Motor (Charts) in 2005. While it has since had an initial public offering for the car rental company, it still holds a 24 percent stake in the company.
GM, Chrysler and Ford are all struggling with huge retiree health care costs that give them a competitive disadvantage with rivals such as Toyota Motor (Charts), which passed DaimlerChrysler to be the nation's No. 3 automaker last year and is poised to pass Ford this year. It also is expected to finally top GM in global sales for the first time in 2007.
The Wall Street Journal reported Friday that DaimlerChrysler plans to offer detailed financial information about its Chrysler Group selectively.
The Detroit News reported Friday that Chrysler Group CEO Tom LaSorda held a conference call with dealers Thursday to try to assure them that Chrysler Group will continue, no matter what DaimlerChrysler decides to do with the unit.
"We have a strong future and we are determined to bring the company to profitability as soon as possible," LaSorda told the dealers during a 10-minute call, the paper reported. "The Dodge, Jeep and Chrysler brands are here to stay."
His call followed an e-mail he sent a day earlier to employees of Chrysler Group urging them to concentrate on executing the company's turnaround plan despite what he described as a "frenzy of rumors."