Following the announcement of a drastic restructuring plan for Chrysler, there are rumours that DaimlerChrysler boss Dieter Zetsche might decide to sell-off the company’s troubled US arm.
Following the announcement of a drastic restructuring plan for Chrysler, there are rumours that DaimlerChrysler boss Dieter Zetsche might decide to sell-off the company’s troubled US arm.
For 13,000 Chrysler workers, February 14 2007 will now be known as the Valentine’s Day massacre. On Wednesday, Chrysler announced a stunning restructuring, which included a 16 per cent reduction in its workforce, shift reductions, a plant closing and a surprise hint that the plan could lead to a DC divorce.
Newspaper reports published in Germany this week suggested that the management of Daimlerchrysler was considering dumping the Chrysler Group, and the possibility was later confirmed by a statement issued on behalf of the multinational.
“Today the supervisory board will reach a decision on the subject of restructuring the Chrysler Group. The board of management intends to consider other, more far-reaching strategic options with partners in order to support and facilitate the program,” the company said. “No option is being excluded in the interest of arriving at the best possible solution for the Chrysler Group and DaimlerChrysler as a whole.”
Citing supervisory board member sources, German newspaper Handelsblatt claimed that DaimlerChrysler boss Dieter Zetsche has commissioned a US investment bank to examine all possible options including-partial or complete sale for Chrysler.
Meanwhile, the February 14 recovery plan aims to reverse the fortunes of the Chrysler Group, which posted a nearly $1,5 billion loss last year and expects to record a loss this year. The plan calls for closing the company’s Newark, assembly plant, and reducing shifts at plants in Warren and St. Louis. A parts distribution centre near Cleveland also will be closed, and reductions could occur at other plants that make components for those facilities.
As was the case with the other two major US automotive manufacturers – Ford and General Motors – DaimlerChrysler’s earnings have been hit hard by rising labour costs and slumping sales as consumers have turned to foreign models.
Zetsche acknowledged feeling pressure about Chrysler, which the company said was a drag on its parent’s earnings. But as recently as last year, Chrysler was helping to prop up Mercedes, which only recently recovered from lagging quality and profits.
Jeremy Anwyl, president of the Edmunds.com, said potential buyers for Chrysler would be limited because of the price tag. He speculated that the company would be attractive to a Chinese automaker because it has a dealership network that could distribute China-built cars in the US Chrysler Group and China’s Chery Automobile late last year agreed on a plan for the Chinese manufacturer to build small cars to be sold world-wide.
Nissan Motor Co. and Renault SA also could be suitors because Chrysler is strong in products such as minivans and trucks where Nissan is relatively weak, Anwyl said.
And several private equity groups recently have poured billions into troubled automotive component manufacturers.
“There’s so much money in terms of the private equity funds across all industries right now,” Anwyl said. “But if such a purchase took place, the firms would have to demonstrate quick results, something unlikely with Chrysler”.
