Investors not sold on Chrysler-GM comboGM stock off, DaimlerChrysler jumps as investors handicap reports that No. 1 automaker may buy Chrysler.NEW YORK (CNNMoney.com) -- Investors seem hopeful that the nine-year-old marriage that united Daimler-Benz and Chrysler is nearly over, but they seem to doubt that General Motors will be the next one to meet Chrysler at the altar. Since DaimlerChrysler (Charts) executives announced they were looking at a possible sale of money-losing Chrysler Group last week, shares of the German-American automaker are up more than 8 percent in New York trading.
DaimlerChrysler said it was looking at all options for the automaker but would not comment on potential buyers or any timetable. While that announcement set off what Chrysler Group CEO Tom LaSorda recently referred to as a "frenzy of rumors," the rumor getting the greatest attention in the market has GM (Charts) weighing a purchase of Chrysler. That report first was attributed to a German magazine on Feb. 14, the day DaimlerChrysler announced it was looking at a possible sale. On Feb. 16 trade publication Automotive News and wire service Reuters had their own reports of talks between DaimlerChrysler and GM, lifting DaimlerChrysler shares another 4 percent in New York trading. But much of that additional gain was lost in trading this week as other potential suitors, such as the Nissan (Charts)-Renault combo and Korean automaker Hyundai, expressed a lack of interest in Chrysler. Meanwhile, the GM investors seem to be listening to many analysts who are saying that buying Chrysler whole is unlikely for the nation's No. 1 automaker, which is still struggling to stem its own losses. "To me the deal doesn't make sense," said Efraim Levy, auto equity analyst for Standard & Poor's. "The cons outweigh the pros. We see no rationale for GM to purchase its struggling competitor." While GM shares have been dinged by the reports of interest in Chrysler, it's nothing that required major body work. The stock fell less than 1 percent last week as the rumors of it buying Chrysler surfaced. Declines of about 5 percent in GM shares this week's trading appear to be unrelated to the latest Chrysler rumors. Levy and other analysts do say that DaimlerChrysler shares are getting a pop as investors bet there will be some kind of deal for Chrysler, even if it is not with GM. "I think it has an M&A premium," Levy said about DaimlerChrysler shares. "I think the most likely buyer is some sort of private equity group that would have ... funding and resources for their own Chrysler group turnaround. And there are people who think the remaining [Daimler] would benefit from not having the albatross of Chrysler." Banc of America Securities auto analyst Ron Tadross raised his target price for DaimlerChrysler shares last week to $76 from $58, partly as a result of what he said was an improved earnings outlook. But he also cited the possible Chrysler sale as contributing to an even more bullish outlook for the stock. "DaimlerChrysler shares would be worth over $80 ... if Chrysler's equity value is in the $5 billion range," he wrote in a note last week. "While such a disposition does not make long-term strategic sense to us, we have generally underestimated high global financial liquidity and pressure on management teams to create short-term value. "Given the above stated figures, the current stock price appears to imply there is a roughly 35 percent chance Chrysler is either disposed of" or forced to produce acceptable profits, he added. |
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