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Daimler chairman confirms talks on sale of Chrysler

BERLIN — Confirming weeks of conjecture and rumour, DaimlerChrysler AG's chairman said Wednesday that it has been in talks with people about the sale of its struggling Chrysler unit.

"In this context, I can confirm that we are talking with some of the potential partners who have shown a clear interest," chairman Dieter Zetsche said before the company's annual shareholder meeting.

He did not name any of the companies that have been in talks.

"So far, I am satisfied with the process. Everything is going according to plan," Mr. Zetsche said.

Mr. Zetsche stunned the automotive world on Feb. 14 when he said that continued losses and fierce competition in the United States meant that the German-American auto maker was considering all options for its Chrysler unit, including a possible sale.

Mr. Zetsche did not say whether any decision to sell Chrysler had been made or if the company was any closer to a solution.

"It is also true that we need to keep all options open, and that I cannot disclose any details, because we need to have the maximum scope for manoeuvre," he said in a copy of his remarks to shareholders released ahead of the meeting.

The company's management requires "the greatest possible flexibility so that we can identify and then professionally implement the best solution," Mr. Zetsche added.

Mr. Zetsche's announcement in February came after the American unit's $1.5-billion (U.S.) loss in 2006.

The company also said it would cut 13,000 jobs and reduce production capacity by 400,000 units as part of a "recovery and transformation plan", aimed at bringing Chrysler back into profitability by 2008.

No clear front-runner has yet emerged to buy Chrysler, but Canadian auto-parts supplier Magna International Inc. reportedly has submitted a bid to buy the business for as much as $4.7-billion.

Magna founder and chairman Frank Stronach has confirmed his company's interest in assuring the future of Chrysler, a major Magna customer, and he has met with Mr. Zetsche.

But Mr. Stronach has also said Magna will not put itself into a position of competing against its other auto-industry customers, and he also is known to be reluctant to take on heavy debt.

Major private equity firms Blackstone Group and Cerberus Capital Management LLP also are rumoured to be in the hunt.

If DaimlerChrysler does sell off the U.S. unit, it will mark a significant change in fortunes since it bought Auburn Hills, Mich.-based Chrysler in 1998.

Despite helping to keep the company afloat as little as two years ago when the Mercedes Car Group suffered through massive quality control problems and declining sales, at least some of the company's more-than one million shareholders have been pushing for a divorce — in both style and substance.

Shareholders Ekkehard Wenger and Leonhard Knoll put forward a motion calling for the company to revert back to its original name, Daimler-Benz AG.

They argued in their motion that 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."

That in itself, however, would not resolve the question of what to do with Chrysler.

No matter when Chrysler is sold, if ever, Daimler is unlikely to make back what it paid. Analysts have valued the unit from between nothing to $13.7-billion.

The estimates vary with the value placed on assets such as brand names, factories and materials, all weighed against Chrysler's estimated $19-billion liability to pay health care benefits for unionized retirees.

Some analysts say the liability exceeds the value of the assets, meaning that DaimlerChrysler would have to pay someone to take Chrysler. O