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Daimler tightens control
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September 8, 2000: 5:31 a.m. ET
Automaker names own man as Mitsubishi Motors COO, cuts stake price by 10%
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LONDON (CNNfn) - DaimlerChrysler AG on Friday took advantage of a scandal surrounding Mitsubishi Motors Corp. to tighten its grip on the Japanese automaker and cut by 10 percent the price it will pay for a one-third stake in the company.
Daimler (FDCX) named Rolf Eckrodt, currently the head of its rail systems unit Adtranz, as Mitsubishi Motors' new chief operating officer.
The company said the Japanese company's head of international operations, Takashi Sonobe, will succeed President Katsuhiko Kawasoe. Mitsubishi accepted Kawasoe's resignation earlier Friday in the wake of the company's admission in July that for up to 30 years it covered up customer complaints about faulty cars. It was partly that confession, triggering a recall of hundreds of thousands of cars, that forced the company to seek Daimler's help.
 Daimler, which agreed in May to buy a 34 percent stake in Mitsubishi Motors, said it haggled down the price it would pay for the stock to ¥405 per share, giving a total purchase price of $1.9 billion, down from $2.1 billion. The deal is expected to close in October.
Daimler said it will also have the option of increasing its stake in Mitsubishi after three years without limitation.
Some analysts had been expecting Daimler also to use the opportunity to boost its stake. But while it kept with its agreement to buy 34 percent of Mitsubishi Motors, it said it would not consolidate its partner's profits or losses into its own reported earnings.
Christian Breitsprecher, an analyst at Deutsche Bank, said it was a smart move by Daimler to stick to its original stake, rather than taking a bigger shareholding and having to shoulder part of Mitsubishi's debt.
"They have a stronger management position in addition to their equity investment and will be able to push forward the restructuring at Mitsubishi," he said.
'Rebuilding customer confidence'
The agreement "will succeed in strengthening our alliance, enabling Mitsubishi Motors Corp. to regain customer confidence, and improve overall performance," DaimlerChrysler chairman Juergen Schrempp said in a statement.
Daimler shares rose 1.1 percent to  58.49 in Frankfurt after the news of the management revamp and lower deal cost. Mitsubishi shares closed 5.2 percent higher at ¥404 before the Daimler announcement, which was made after the market in Tokyo closed.
But while the news pushed Daimler shares higher, Breitsprecher said that the more important, shorter-term issue for the Stuttgart, Germany-based company was the performance of Chrysler in the U.S. market over the next few years.
"It's important to look at the relative weight of the (Mitsubishi Motors) investment, which is worth almost 2 billion, but the whole market capitalization of DaimlerChrysler is 58 billion," he said.
Volvo stands by its Mitsubishi deal
AB Volvo, the world's second-largest truck maker, said that changes in the
Daimler and Mitsubishi alliance would not weaken its own deal with the Japanese automaker.
"Our position has not weakened because of this (new deal). They are adding an operative boss for the car division, which confirms what MMC has said, and that is that the car and truck divisions must be separate," Volvo spokesman Mats Edenborg was quoted as saying by Reuters.
Sweden's Volvo and Mitsubishi took small stakes in each other last year and agreed that Volvo would acquire one fifth of Mitsubishi's prized truck and bus unit when it is sold in July. 
-from staff and wire reports
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