By on April 10, 2007

tribbles2.jpgAt last week's DaimlerChrysler stockholder meeting, a man named Ekkehard Wenger stepped up to the microphone and said his piece. "For nine years you have been sitting on this scrapheap called Chrysler. Nobody has learned anything. To call this a sale is a euphemism. If you pay for the garbage man to empty the dustbin, does that mean you have sold something to the garbage man?" While calling Chrysler a "scrapheap" is a bit harsh– the American automaker supported Mercedes for several years when the Germans were losing money– one wonders how Kirk Kerkorian feels about being called a garbage man.

Captain Kirk surprised quite a few people last week. The incipient nonagenarian beamed down the only private bid for Chrysler thus far: $4.5b, with $100m in cash up front in return for exclusive bidding rights. Kirk's play marks his second attempt to take over Chrysler; a sequel to his ‘95 "I'm with Lee" (Iacocca) tour. While that financial foray failed, Kirk became Chrysler's largest stockholder. He secured a place at the board room table for his beancounter extraordinaire Jerry York. 

In 1998, Daimler-Benz acquired Chrysler. Despite a financial bonanza, Kerkorian expressed his displeasure with the so-called "merger of equals" as billionaires are wont to do: he sued DaimlerChrysler for $2b. Kerkorian claimed Daimler-Benz had deceived investors, misrepresenting a corporate takeover as a partnership. He lost the lawsuit, appealed and lost again.  

Kerkorian expressed his displeasure as billionaires are wont to do: he tried to take over General Motors. After buying huge quantities of GM stock, Kirk secured a place at the board room table for his beancounter extraordinaire Jerry York. When GM rebuffed Kerkorian/York's plans for reform and rejected a suggestion to merge with Renault-Nissan, the Lion of Las Vegas cashed in his chips, sent Jerry home and called it a day. 

Spying Chrysler's upcoming dissolution, Kerkorian is hoping the third time's a charm.  In carefully worded letters from his pet Yorkie to CEO Dieter Zetsche and the DCX Supervisory board, Kerkorian outlined his USP (Unique Selling Point). If they'll deliver Chrysler unto Kirk he'll offer the UAW and Chrysler's senior management "the opportunity to participate… as equity partners in the transaction." 

In a statement released last Friday, Tracinda Corporation (Kerkorian's corporate front) described a Kerkorian-controlled Chrysler where "all the parties share equitably — with no one group (including ourselves) trying to gain an unfair advantage over the others." 

For their part, the Germans are understandably leery of Kirk's intentions. Lest we forget, just three short years ago, Mr. Kerkorian was dragging DCX to court to answer fraud charges, which cost DCX tens of millions of US dollars in legal fees. 

Given Kerkorian's "strip and flip" history with other acquisitions, the United Auto Workers (UAW) is suspicious that Kirk's ode to consensus masks the man's intention to slice the company to ribbons. UAW Local 7 president Dale Hunt asked, "What changed his mind from breaking it up to wanting to keep it together, and now all of a sudden he wants to get involved with the union?" 

Maybe it's got something to do with DCX' assertion that they won't sell to someone just because their bid was worth a few extra dollars. (As if.) The Germans have dictated that two other considerations must be addressed by bidders: preserving workers' benefits and ensuring Chrysler's long-term health. 

That's gonna be a bitch. Chrysler's new master will inherit almost $17b in healthcare liabilities. Kerkorian and Co. are trying to resolve the issue by asking the UAW for healthcare concessions in return for [a purported] 10 percent equity stake in the company, plus a seat on the board.  

Or not. UAW President Ron Gettelfinger vehemently denies participating in any discussions with Kirk's mob.  Last Friday, in an interview with Detroit radio host Paul W. Smith, Big Ron stated, "I've had no discussions with anybody from Tracinda, and I don't recall anyone in our organization talking to them. We've had no discussions in this regard." 

If Kerkorian wants to pull off this deal, he'll have to mend fences with Big Ron's constituency- and fast. Every Chrysler bid is likely to include provisions for UAW concessions. If Captain Kirk wants his money to rule the day, he needs more than a promise to give the UAW an equity stake. As always, a procession of armored cars stuffed with cold hard cash should do the trick. 

Additionally, Jerry York had better start putting in a lot of overtime kissing ass on the DCX board.  With a ten year history of animosity to overcome, Tracinda's main men may be about to learn the meaning of an old military expression: "Don't shit in your own mess kit." 

Neither DCX nor the UAW have shown any interest in Kerkorian's offer.  With competition including one of Chrysler's biggest suppliers (Magna) and a former Chrysler COO (Cerberus' latest hire, Wolfgang Bernhard) this looks like strike three. 

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44 Comments on “Chrysler Suicide Watch 11: Captain Kirk Beams Down...”


  • avatar
    GS650G

    It’s beyond stupid for Kirk to get involved with another domestic automaker, especially one argueably in 3rd place, after the beating he took with GM. The unions just want to be taken care of, a board seat does not mean much. All of the board seats would be their idea of a partnership.

    DCX stock is going up daily as the chum hits the water. Dumping cry-sler would have the beer flowing all over the continent.

  • avatar

    If nothing else, Kerkorian keeps it interesting. The real question for me is, why would ANYONE want to purchase Chrysler? With all of its debts and UAW problems, is there a chance for a decent ROI there?

  • avatar
    troonbop

    The Tracinda description of the deal sounds a little flaky.

  • avatar
    Gottleib

    The Chinese should buy Chrysler. Then they would have a complete auto company to expand their own productive capacity. Besides with all of their cash flow from goods produced and sold in the US by Wal Mart they could probably fund the pension and retirement liability for the workers that will eventually loose their jobs to China anyway. It seems like the neighborly thing to do in our new global economy.

  • avatar

    troonbop: The Tracinda description of the deal sounds a little flaky.

    If you think that excerpt sounds flaky,here’s more:

    “What we have in mind is a true partnership of all the constituencies — the company’s management, all of its employees (both union and nonunion) and the investors bringing the necessary new funds to the company to enable it to substantially enhance its product spending — the lifeblood of any auto company.

    “The economics of the automotive industry have become brutal, particularly in Chrysler’s principal market, North America. Consequently we believe the only realistic plan for Chrysler is one in which all the parties share equitably — with no one group (including ourselves) trying to gain an unfair advantage over the others.

    “What we are talking about is a transformation in the way the risks and rewards in a large enterprise are shared — an arrangement in which the interests of all constituencies are more fully aligned than in today’s typical structure.

    “We acknowledge that such an approach cannot be ‘forced’ on any of the parties, but rather can only be achieved with all parties feeling as if they are the recipients of a fair deal.”

  • avatar
    Sid Vicious

    Gettlefinger has got to be losing his mind. There’s no way out of this one.

    It’s “Concede or die.” for the UAW. It’s looking more and more like Chrysler is DCX’s Delphi. How do you get rid of this 1000 lb. anchor around your neck?

    I just don’t see any way out for DCX other than a (more) massive payoff to the UAW, or just spin it off and let it die on it’s own. Of course this would spawn lawsuits that would likely drag Daimler-Benz down too.

    Scary.

  • avatar
    Tomb Z

    This may the kind of poker game where everyone at the table is the patsy.

  • avatar
    starlightmica

    How much DCX stock does Kirk still own? Is he just posturing to pump up the value of his shares?

  • avatar
    jurisb

    if chrysler wants to survive they must generate profits. how can they generate profits if they don`t make cars, or the ones they make have to be so heavily discounted( sometimes I think the cars they make are already discounted on the drawing board) that they make no money. plus from the little money you make, you have to flood bank accounts in germany and japan who get their share for giving you platforms, chassis etc.and as long as you have people who want to own a company and who see only dollars behind it, but not beauty in the metal, there will be no survival. kirk , can you name me the richest car guy in 1967? why not? because nobody remembers people`s money. only what tangible achievement they have left behind, whether it`s a beautiful son, or a gorgeous concept car, that`s another story.money is not an achievement. it`s just a possibility,a chance, or a half opened door to achieve something. there are books of sculptures, no books of millonaire history.

  • avatar
    Zarba

    Kirk hasn’t forgotte, nor forgiven, the b****slapping he got at the hands of DCX. His bid has two goals:

    1) Pump up the value of his existing shares so he can dump when it goes to a post-sale high on investor speculation, and…

    2) Set himself up to sue Daimler-Benz (The remaining part of the “Partnership of Equals”, when his bid is rejected in favor of Magna’s. He can tie them up in couret for YEARS and will do it just to poke a finger in their eye. Money and lawyers, he’s got. If he gets a post-sale run-up in the price of his stock, he can sell (the old Pump-And-Dump), and get Daimler-Benz to pay him a settlement to make it all go away.

    He wins either way.

    He may be old, but he’s not an old fool.

  • avatar
    MgoBLUE

    Green hat (creative): As dire as these straits are, THERE HAS TO BE MIDDLE GROUND WHERE MGT, THE UNION AND TRACINDA CAN PROSPER TOGETHER, RIGHT THE SHIP , AND BUILD VALUE (for both customers and stockholders) AGAIN.

    Black hat (critical): Even as a lifelong optimist…I’m not sure this ship can be saved. Is this ship even worth saving? Short-term, nobody wants to see the hardship that all these job losses would bring. BUT, long-term, these individuals (from top to bottom) can be retrained and rehired elsewhere…regardless of their geographic location (Auburn Hills, Canada, Mexico, etc.)

    I don’t say this with malice, but for what its worth, as an automotive phanatic (not sure if I meet the spec for “pistonhead”) I can honestly say that I’ve never “desired” a single Chrysler/Dodge/Jeep product in my life. Not a one.

    I wonder if Captain Kirk could change that?

    What is Kerkorian’s background? Does he have any engineering or automotive training? Or is he just an investor/beancounter who has an interest and thinks he’d be good at ‘directing’ a car company?

  • avatar
    blautens

    I feel totally misled. I thought this was an editorial about tribbles.

    *sigh*

  • avatar
    Steve Biro

    MgoBLUE… I understand your point entirely. I agree: There’s isn’t a single Chrysler, Dodge and Jeep-brand vehicle that I would consider buying right now – and there hasn’t been one for many years.

    To answer your question about Captain Kirk, I heard him quoted in an interview during his litigation with DCX a few years ago that had the German company been more forthright about the transaction being an acquisition instead of a “merger of equals” and offered more money per share as a result, he would have been happy to “take the money and run.” I think that tells you all you need to know about his motivations.

    All this being said, predictions of the Chrysler Group’s death may still be premature. The unit is in trouble because it has been mismanaged with a product strategy grossly heavy in trucks and SUVs. All the companmy needs is a couple of new cars that become hits (of course, this is easier said than done – but not impossible) and they’ll be the darlings of the auto world.

  • avatar
    Brian E

    @Steve Biro: Chrysler had a few hit cars based on the LX platform, and Mercedes swears they’ll never make that mistake again. After stabbing Mitsubishi in the back and deciding to finish the platform underlying the Compass and Sebring on its own, Chrysler has no platforms left with which to build new hit cars.

    Chrysler’s parts bin is in desperate shape as well. The new Saturn Aura, while not perfect, looks like a Lexus in comparison to the Sebring. I suspect that interior improvements have been deliberetly held back by the German overlords to further increase “product differentiation”.

    Chrysler can’t build hit cars without Daimler, and it can’t build them with Daimler. It’s a no-win situation.

  • avatar
    cheezeweggie

    Kirk has the money and the time to F*** with the Germans just because they burned him in 98. Let’s see what happens.

  • avatar
    Steve_S

    So if I read this right Capt Kirk wants all partners inside Chrysler to share responsibility for the company; can’t say as I see the problem. It’s like renting a house or leasing a car instead of buying it. There is no sense of ownership, no sense of responsibility and you do just what you need to do and no more. There can’t be an “us vs. them” mentality for a company to survive and prosper. With pay and bonuses tied to profit and or reliability goals then the worker becomes empowered. If they want more money they need to help boost profit and or quality. What benefits them directly benefits the company.

  • avatar

    cheezeweggie: Kirk has the money and the time to F*** with the Germans just because they burned him in 98.

    He has the money but he turns 90 in June, so I don’t know about the time.

  • avatar
    GasGuzzler

    My favorite angle of Kirk’s current Chrysler bid is:

    April 1995: Kerkorian launches an unsuccessful $23 billion hostile takeover bid for Chrysler.

    April 5, 2007: Kirk makes a $4.5 billion cash offer for Chrysler.

    So, wait a little over 10 years and save about $18.5 billion.

    **First read on Winding Road, taken from Forbes Chrysler timeline

  • avatar

    Steve_S: There can’t be an “us vs. them” mentality for a company to survive and prosper. With pay and bonuses tied to profit and or reliability goals then the worker becomes empowered. If they want more money they need to help boost profit and or quality. What benefits them directly benefits the company. I agree wholeheartedly. However, the UAW doesn't see it that way. Between the non-union transplants and the GM/Ford/Chrysler buyouts and plant closings, their membership is dwindling. They're in a fight for their very existance. The last thing they want is workers who feel empowered. They have to have an environment where workers are totally dependent on them for everything to ensure their survival. From an article about union skepticism on Kerkorian's offer in last Friday's Detroit New: For many, the idea [of employee ownership] runs contrary to organized labor's core values. "We need a union that is separate from the company because the union and the company have become way too close," Daniel Bennett, a committee chairman for UAW Local 122, said Thursday. His local represents Chrysler workers in Twinsburg, Ohio. "It is necessary for both of us to exist. There's a fine line that cannot be crossed." The UAW isn't going to go for anything they think might threaten their power — like empowered workers who have a sense of responsibility toward their company.

  • avatar
    pb35

    I stole this headline from another site but it definitely bears repeating:

    “Chrysler needs Kevorkian, not Kerkorian.”

  • avatar

    Our neighbors to the north weigh in: The head of the Canadian Auto Workers Union says he will try to thwart billionaire investor Kirk Kerkorian's bid for Chrysler, fearing Kerkorian will cost thousands of workers their jobs. CAW President Buzz Hargrove said Tuesday that Kerkorian's Tracinda Corp., as well as private equity investors who are studying Chrysler, have a history of hurting workers. "We don't have much confidence or trust in Mr. Kerkorian," Hargrove said in a telephone interview with The Associated Press. "He's made billions by coming in, buying low, cutting jobs and throwing people out of work, then selling," Hargrove said. … Hargrove said the CAW is most interested in suitors who would keep Chrysler intact and honor the terms of its contract. He also said he has had no contact with Kerkorian's group, nor would he want any. "No, not interested," Hargrove said when asked if he would entertain talks with Kerkorian. The letters didn't mention offering an equity stake to the CAW, but Hargrove said the union is not interested in that. " We see absolutely no advantage to that whatsoever," he said. From: Detroit News On Line

  • avatar
    Luther

    “The last thing they want is workers who feel empowered. They have to have an environment where workers are totally dependent on them for everything to ensure their survival.”

    Exactly right. Gettelfinger et al are shakedown artists not businessmen. The Us vs. Them mentality is at the core of Labor Union existence. Concessions and an equity stake run counter to the “core values” of UAW. Can you imagine Gettelfinger fretting over profit/loss issues? That is far too much work for him to take on. Why buy the cow when you can get the milk for free? I feel sorry for UAW members duped by these legalized parasitic jackasses.

    Kirk is a Vegas showman…Pump-n-Dump is easy…I dont know how Chrysler is going to survive…Chrysler is going the way of the Soviet Union.

  • avatar
    hltguy

    Just to think around ten years ago Daimler paid $36 BILLION dollars for Chrysler and now Tracinda offers a paltry $4 billion, with only $100 million up front? Looks like Mr Kerkorian is getting the last laugh. By the way, let’s don’t be too hard on Kerkorian, he built the International Hotel in Las Vegas in 1969 (now the Las Vegas Hilton) and got Elvis Presley to do concerts again, beginning at the International Hotel in 1969. Being an Elvis fan, thanks Kirk!

  • avatar
    vitek

    Luther
    At least the costituent “republics” of the soviet union survived. Its Dodge and Chrysler that appear destined to follow Plymouth to the “ash heap of history”. The union’s refusal to take an active role in making Chrysler profitable such as through an equity stake tells all one needs to know. By saying they want someone who will keep things in the same manner that brought Chrysler to this point, the only acceptable bidder will be the tooth fairy.

  • avatar
    Luther

    Seems to me that Kerkorian made an offer he knew would be turned down even with a $100 million bribe…errr…incentive. What is his equity stake in Chrysler?

    The man is definitely a great poker/chess player.

  • avatar
    rtz

    Why can’t Kirk supply money to anyone who could be allowed to buy Chrysler and acquire them in a round about means?

    Supposedly Wal-Mart won’t sell abandoned stores to their competitors. Same type situation.

  • avatar
    Landcrusher

    Frank Williams hit the nail on the head. Changing the risk reward relationship is a pipe dream in the present environment.

    I think you would have to destroy the UAW and start over to get even close that kind of labor relationship. Better yet, move to a right to work state and away from Michigan.

    The unions have unwittingly conspired with management to greatly reduce the value of the workers’ experience. Take a plant tour and see how rationalized, automated, and procedure oriented everything is.

  • avatar
    PandaBear

    I also agree that the only way for Chrysler’s survival is to sell to the Chinese. Then, they will

    1) Spend some money they earned from export to balanced the US trade deficit

    2) Pay of the pension liability of Chrysler

    3) Gain a market and name in the auto industry in the world stage. Ok, maybe not a good name but at least better than starting from ground zero.

    4) Gradually reduce domestic production and “wait out” all the old union member’s retirement/death, and have a second source back in China for any production need due to any strike.

    5) Convert Chrysler factory into a “foundry” like car sub-contracting business for all other manufacture

    Every one, including the union worker, will be happy as they will still keep their pension or job bank. But then union will probably lose a significant influence.

  • avatar
    Arnie

    I dont think the Germans will sell Chrysler to the Chinese and furthermore it would be a stupid thing to do. It would allow them to establish a beachhead in the States and accelerate the Chinese “take-over” of the market by a decade or more. Daimler-Benz wants to sell Chrysler to somebody who can make it thrive in the future. KirkKerk would go on a slash’n burn rampage and either sell Chrysler to the Chinese within 3 years or chop it up and sell it to more than one buyer, probably Chinese. Selling Chrysler to private equity groups carries the same risk. I think the Germans want Chrysler to go to Magna or GM. My bet is on Magna.

  • avatar
    Hippo

    Panda,
    The only way it makes sense to buy Chrysler (or Ford for that matter) is with the intent of forcing a strike and bankruptcy. It would be a bad PR move for the Chinese to establish a foothold in this way.
    Even starting from scratch in a right to work state would be a better option for them.

  • avatar

    It is amazing that the CAW assumes that Kerkorian’s bid is bad news, They are not exactly in a position of strength.

  • avatar
    Terry Parkhurst

    The first time Chrysler – then an independent corporation – saved itself, it came out with the K-car, circa 1980. They did pretty well with that platform, stretching out in the marketplace for 12 years, sometimes even making an interesting car or two, thanks to Carroll Shelby’s tweaking. Anyone remember the Dodge Omni GLH (Goes Like Hell)? Wait, I recall that being based on a VW platform, Chrysler had bought from VW. Well, there was the Shelby Lancer and Shelby Charger, both based on the venerable K-car, king of the USPS delivery machines.

    The second time it saved itself, it came out with the cab-forward designs in 1993. Buff books were beside themselves with this “revolutionary” design, that allowed a huge interior in the cabin. Could a 300M be a future collectible?

    Daimler-Benz takes them over in late 1998 and begins a process of taking its old platforms and putting them under bodies designed in America; but it does allow Chrysler – now a division of DaimlerBenz – to bring back the legendary Hemi-head V8. And the Germans can’t figure the Dodge Ram; so they leave it alone. Pickups aren’t a European thing, thanks in part to the price of gas and diesel, over there (although commercial drivers pay a different rate). You won’t find kids in backwards baseball caps riding around in duallys on a Saturday night.

    It is, after all, about product. One has to wonder what “trick bag” as they used to call it in the Sixties, Chrylser would have, if it went back on its own.

    As far as paying the garbage man to take out the garbage, I think a more appropriate analogy is when a car is sold to the auto recycler to allow its metal and other recyclable materials to be used again. Maybe if someone in China does that, we can call it another form of auto recycling.

    Some Chinese firm is doing it with MG. As the late Molly Ivins might have said, “Who woulda thunk it?”

  • avatar

    One’s impression of the curmudgeon at the shareholders’ meeting doesn’t hold for Ekkehard Wenger. He’s a slam-dunk shareholder’s advocate who has been the terror of insular German managers for years. To the point where German companies have sought to smear him, to dampen his effectiveness.
    If he’s got Chrysler in his sights now then it’s a telling sign that the CX will soon be broken off from the D …

  • avatar

    In addition to his comments on the future of Chrysler, Ekkehard Wenger also entered a motion for the company to revert back to the original name, Daimler-Benz AG.

    The motion stated to “maintain a corporate name that evokes associations with the failure of the business combination with Chrysler is detrimental to the image of the corporation and its products.”

    The motion was rejected.

  • avatar
    jerry weber

    A low manufacturing cost Asian company is not going to buy into high cost chrysler. It is suicide to take on the UAW when the Japanese for over 30 years have been able to keep them out of their plants inthe US. Ford and GM would do anything to cut the UAW loose, and any expansion on thier part will be in low wage countries.

  • avatar
    wsn

    Replying to Arnie:
    Daimler-Benz wants to sell Chrysler to somebody who can make it thrive in the future.

    Have you ever owned any stocks in your lifetime? I assure your that Daimler wants to sell Chrysler to the highest bidder.

  • avatar
    windswords

    Terry Parkhurst:
    April 11th, 2007 at 12:42 am
    The first time Chrysler – then an independent corporation – saved itself, it came out with the K-car, circa 1980. They did pretty well with that platform, stretching out in the marketplace for 12 years, sometimes even making an interesting car or two, thanks to Carroll Shelby’s tweaking. Anyone remember the Dodge Omni GLH (Goes Like Hell)? Wait, I recall that being based on a VW platform, Chrysler had bought from VW. Well, there was the Shelby Lancer and Shelby Charger, both based on the venerable K-car, king of the USPS delivery machines.

    —————-
    Acutally the the Omni/Horizon was designed by Chrysler Europe (a merger of Simca and Rootes Group). The close resemblence to the VW Rabbit and Chrylser’s early use of VW sourced engines (as well as Peugeot) for this car until there own 2.2 liter was ready have led many to believe that it was based off the Rabbit.

    Frank Williams:
    April 11th, 2007 at 7:20 am
    In addition to his comments on the future of Chrysler, Ekkehard Wenger also entered a motion for the company to revert back to the original name, Daimler-Benz AG.

    The motion stated to “maintain a corporate name that evokes associations with the failure of the business combination with Chrysler is detrimental to the image of the corporation and its products.”

    The motion was rejected.

    ————–

    The motion was SOUNDLY rejected, gathering only 1.6% of the votes according to Allpar. I was surprised by that, I thought it would be more.

  • avatar
    Arnie

    wsn:

    Yes I have. Have you?

    Don’t be so childish. There’s more to doing business than making a quick buck. You must think badge engineering is a good idea. Quick buck, low cost, good for stockholders ehh? Selling a company to your most dangerous competitor because he pays 10% more? Good for your shareholders ehh?

  • avatar
    jthorner

    I don’t think current DaimlerChrysler management is serious about offloading Chrysler and getting serious about it’s own deteriorating business position. There seems to be a deep arrogance in many German business circles. Years ago when travelling on business I had the impression that the British thought that they really did still rule the earth and that the Germans felt the earth would indeed be better off if they were in charge, but that they had better not say so out loud. Daimler executives probably still expect to somehow make the Chrysler experiment turn out.

  • avatar
    Thomas Minzenmay

    “the American automaker supported Mercedes for several years when the Germans were losing money”

    I agree with the article, but this part is sort of misleading. As far as I know there has been only one year in which the Germans were losing money, which was 2005. And the only reason they did so was because of Smart. So Mercedes supported DCX as much as Chrysler did back then (probably even more).

    Smart was a disaster of its own (8 Billion € and counting), but Chrysler has cost DCX almost 40 Billion € since 1998 (including legacy costs). So there’s not much supporting the German half there…

  • avatar
    Luther

    “At least the costituent “republics” of the soviet union survived. Its Dodge and Chrysler that appear destined to follow Plymouth to the “ash heap of history”.”

    Their assets will survive… Plants, equipment, and brand names all have value after the collapse.

    The plants will probably go for pennies on the dollar and the equipment will be bought and packed up for China. The brand names will be auctioned off where Jeep will have the highest value. Maybe an invester from Russia or Dubai will have success with Jeep globally… Jeep could be a great competitor with Mercedes, Toyota (G-Class, Landcruiser) and GM Hummer.

  • avatar
    my12by60

    The terms of the bids for Chrysler are likely to reveal that Chrysler has no value to a buyer unless the UAW agrees to big cuts and DCX agrees to retain some of Chrysler’s liabilities. Buyers looking to put new money into Chrysler will likely be met with the same level of cooperation from the UAW that the proposed Delphi new equity investors have been met with. That is, the UAW will be telling the Chrysler buyers to pound sand. Why agree to cuts to facilitate a sale when you already have a sugar daddy bird in hand in DCX with enough liquidity to keep your current wage and benefit plan in place a while longer? And 10% of Chrysler equity (if that is the purported Tracinda offer) does not seem likely to be near enough to offset the value of what the UAW will be asked to give up to make a deal happen. New buyers really don’t have much to offer the UAW that is better than what the UAW already has with DCX ownership so I don’t see much cooperation coming from the UAW. And I don’t think any company will buy Chrysler solely with a plan to create value by taking the company into BK. The possible outcomes in a BK are too undefined and subject to a BK judge’s rulings. I see DCX using the bid process to allow it go back to its shareholders and make the point that no bid offers any net value after netting cash to be paid against liabilities that must be retained. Then DCX will slug it out with the union itself later this year and take Chrysler BK itself if necessary to stop the cash bleed and cut the liabilities down to size.

  • avatar
    Thomas Minzenmay

    @my12by60: I would have agreed until a couple of weeks ago. But now, most analysts agree that Zetsche pretty much has to sell Chrysler. If DCX announces anything short of a sale, the stock price would fall rapidly and open the door for raiders.

    An internal analysis by JP Morgan revealed, that it would be better to basically give Chrysler away than keeping it. According to the same report, the best way would be to bring Chrysler to the stock market and thereby deprive the UAW of the security that Daimler offers. But this scenario is also quite unlikely, since it would take too much time, while the stockholders want quick actions.

    Just look at what happened today: Rumors appeared that there won’t be an exclusive negotiating party by the end of this month, since Magna needs a couple more days and Kirk might present a better offer. This rumor about a possible, very short delay already lead to a 2.3% loss for DCX stocks.

  • avatar
    Luther

    Sell Chrysler to UAW for the $800M they have in their strike fund..HaHahAhAhh…I kill me. It would be such great entertainment to watch Gettelfinger et al try to actually run a profitable business…Slap-stick at its finest.

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