Daimler, Chrysler Break Up Opposed

by : Glady Reign

The Chrysler Group's series of hardships is becoming a burden for its German parent DaimlerChrysler AG. But a member of the DCX's governing supervisory board said last Friday that he would oppose a deal leading to the breakup of the Auburn Hills automaker.

"We wouldn't support a solution such as a private equity firm that would cut out choice bits," said Helmut Lense, one of the ten employee representatives on DaimlerChrysler's 20-member supervisory board, which is likened to a U.S. board of directors. Lense said that he would prefer to see a manufacturing company, such as another automaker, take control of Chrysler in the event of a sale.

It was earlier reported that DaimlerChrysler is already in talks with potential buyers that include General Motors Corp. and private equity firms Blackstone Group and Cerberus Capital Management LP. These powerful firms, joined by other private entities, aim to acquire the company at some future time.

In February, as DCX reported a $1.5 billion loss for Chrysler, DaimlerChrysler CEO Dieter Zetsche said that the company was considering all options for Chrysler - including a sale that would put an end to the nine-year merger of Daimler-Benz AG and the former Chrysler Corp. It was also in February when the company stressed that all options remain on the table.

Among the possible options, DCX may retain a minority stake of 20 to 30 percent in Chrysler and this is according to people familiar with the sale talks. They said top managers are intent on working out a smooth and rapid deal to minimize management defections and disruption at Chrysler and its dealerships. "We want the best solution for the Chrysler Group, and for DaimlerChrysler," said one company official who asked not to be named.

A company can only function well if all of its divisions are healthy, Lense said. "You can't have one part where you're constantly expecting losses," he also emphasized. "That is a burden on the whole company." Lense, the chief employee representative of the huge UntertÃ?rkheim plant in Stuttgart, said that the structural problem which cannot be resolved only by cutting production capacity. He added that Chrysler needs to balance out its model range, and offer more small cars with fuel-efficient engines.

Lense added that Chrysler may need partners to share development costs, although he, like the other employee representatives on the DaimlerChrysler board, opposed a recent deal to have China's Chery Automobile produce subcompacts for Chrysler. "Chrysler won't improve its image by selling what are effectively Chinese cars," he said.

DCX officials declined to comment on potential bidders and their selection criteria. However, an inside source said that DCX had set conditions in recent deals with private equity firms. These conditions include sales of MTU Aero Engines and the company's off-highway engines unit, which included part of Detroit Diesel.

Willi Diez, the head of the Auto Industry Institute near Stuttgart, said that Chrysler's problems stand out now because the rest of the company is running smoothly. "The problems at Mercedes are being solved. Mercedes is profitable. The problem of Smart has been solved. Trucks are profitable. Everything runs well at the core business except Chrysler," Diez said. "The shareholders want to earn money. They have no patience. The lesson for German manufacturing is that they should focus on their own business," he further mentioned, pointing to the success of BMW AG after the Bavarian carmaker sold Rover Cars in 2000.

Despite the controversy about the potential sale, DCX aims to set forth more powerful lineup. Studies and advancements are inspired by Ford engines, , Toyota technology and GM's staying power.