Is Daimler Ready to Sell Chrysler?
DETROIT _ DaimlerChrysler Chairman Dieter Zetsche, the onetime Chrysler Group pitchman who championed its role in the merged company, stunned the auto world Wednesday when he refused to rule out selling the Auburn Hills, Mich.-based unit.
Zetsche’s surprising comments, made as Chrysler announced 13,000 job cuts, including about 5,300 in Michigan, sent DaimlerChrysler stock soaring and raised a huge question about Chrysler’s future.
“Our thinking does not exclude any options. This means all options are on the table,” Zetsche told reporters after being asked if his comments meant Chrysler could be spun off or sold.
German media appeared jubilant at the idea, and DaimlerChrysler shares rose $5.33, or 8.3 percent, to $69.78.
No further details could be given, said Zetsche, who spent five years running Chrysler Group before becoming DaimlerChrysler’s chief in 2006.
In launching his “Dr. Z” ads last summer, Zetsche downplayed talk that the two companies should not have merged in 1998. “The merger is not an issue going forward anymore,” Zetsche told the Detroit Free Press in July.
A year ago, Chrysler was posting profits and gaining U.S. market share. But since then, the Chrysler Group has had to deal with mounting inventories amid slumping sales. The Auburn Hills unit Wednesday posted a 2006 operating loss of $1.5 billion.
The turnaround plan is supposed to allow Chrysler to make a profit by next year. Executives hope for a $4.5 billion improvement by 2009 to an operating profit of $3 billion.
Over the next three years, the company will cut its workforce by 16 percent _ including 11,000 hourly jobs and 2,000 salaried jobs, many of which will be in the metro Detroit area.
Chrysler’s Canadian operations will lose 2,000 jobs.
Company officials cautioned that special retirement programs and other termination or buyout packages will target specific areas of the company. They will not be across-the-board packages like those offered in recent Ford Motor Co. and General Motors Corp. restructuring plans.
Hourly workers should learn the details within three or four weeks and salaried workers in the next business quarter, the company said.
Buzz Hargrove, CAW president, said he hopes to announce the Canadian packages today.
The Warren Truck Plant in Michigan, which makes Dodge Ram pickups, will lose a shift this year and about 1,000 workers.
An assembly plant in Delaware will lose a shift this year and be idled in 2009, and a parts plant in Ohio will be shut this December.
A shift will be reduced at the St. Louis South Assembly plant where minivans are made _ a surprise to analysts who expected a cut at St. Louis North where Dodge Rams are made.
The company said it hopes to reduce production capacity by 400,000.
Tension had been growing in Chrysler’s plants as Wednesday approached.
“Something had to be done, obviously,” said Matt Davidson, 49, of Clinton Township, Mich., who works at Warren Truck. “All in all, we knew it had to happen. It wasn’t a surprise.”
The company also said it wants to reduce material costs by $1.5 billion over three years and explore the sale of support operations.
No large investment in Detroit’s Jefferson North Assembly plant was included in Wednesday’s announcement, as several auto industry analysts had expected. Nor was any official news of increased platform sharing between Mercedes and Chrysler.
The company did announce plans to invest $3 billion in fuel-efficient powertrains.
The restructuring is expected to cost Chrysler $1.3 billion. Reduced production, to get inventory in line with demand, is expected to cost about $300 million.
The day’s biggest surprise was Zetsche’s comments _ echoing an early-morning statement _ made after Chrysler Chief Executive Officer Tom LaSorda presented the turnaround plan to journalists.
“In addition to that and in order to optimize and accelerate the presented plan, we are looking into further strategic options with partners beyond the business cooperation partners mentioned,” Zetsche said. “In this regard, we do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler.”
Of future strategic options, LaSorda said, ” It is something that he and I are teaming up on and fully endorse. “
The German business newspaper Handelsblatt called the announcement the beginning of the end of a difficult marriage and said the market will reward the move.
But Ron Harbour of Harbour Consulting said Zetsche’s comments don’t necessarily mean Chrysler is for sale.
“He has a duty to not only the board but all of the shareholders to make sure that as they make strategic decisions, that they’ve exhausted all options,” he said. “Don’t jump to the conclusion that … Chrysler is going to be sold.”
Some U.S. analysts have noted that a breakup could be difficult for the two companies that have been working since 1998 to share resources in projects such as the Chrysler 300.
Nevertheless, the market reacted to the idea. “Why is stock up? It’s certainly not the restructuring plan. I think it’s the speculation they’re going to spin off Chrysler or sell it or something,” Bradley Rubin of BNP Paribas said.
The New York Times reported Wednesday that DaimlerChrysler retained JPMorgan to advise it, something Chrysler officials would neither confirm nor deny.
This is Chrysler’s second major turnaround plan in a decade. Zetsche led the last one as Chrysler CEO in 2001. Forty-thousand jobs were cut in the past six years and 16 plants were shut or sold.
On Wednesday, Zetsche addressed the impact on workers: “Even though we are very much aware of the hardship that comes along with the restructuring plan … we do believe that ultimately it’s better for the Chrysler Group.”
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Detroit Free Press staff writers Alejandro Bodipo-Memba, Katie Merx, Joe Guy Collier, Mark Phelan and Jason Roberson contributed to this report.
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