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Bid talk boosts DaimlerChrysler shares

Shares of DaimlerChrysler AG pushed to a new 52-week high as speculation swirled that a Canadian auto supplier and a private equity partner would bid for Chrysler, the German company's ailing US arm.

KeyBanc Capital Markets analyst Brett Hoselton said in a note to investors that his sources, whom he did not identify or describe, tell him that Canadian auto supplier Magna International Inc and a private equity partner have written a joint letter offering to buy Chrysler for US$4.6 billion to US$4.7 billion.

The talk comes as investors, markets, employees and suppliers have been itching to find out who will buy Chrysler. There have been constant rumors that one suitor or the other will soon make a multibillion dollar bid.

A company official said, however, that no news on a potential sale was imminent and no action was expected at the company's annual shareholders' meeting on April 4.

The official, who did not want to be identified because of the sensitive nature of the discussions, said although shareholders will bring up the sale at the meeting in Berlin, "no material news" was expected.

Hoselton's note did not identify Magna's private equity partner, but said the company appears to have been in contact with Cerberus Capital Management LLC and Blackstone Group, two firms that have reviewed Chrysler's finances.

Hoselton described the bid for Chrysler as a low one and said the company knows that it is unlikely to prevail.

"The company also sees it as an opportunity to purchase an inexpensive stake in the automaker should other bidders retreat," his note said.

He said Magna would take a 20 percent to 25 percent stake in Chrysler.

Chrysler spokesman Mike Aberlich would not comment on Hoselton's note or on any potential bids.

Magna's top executive has confirmed his company's interest, but a company spokeswoman on Friday would not comment on the possible bid for one of its largest customers.

"We continue to review potential alternatives regarding the future of the Chrysler Group. Discussions about this matter are strictly confidential and will not be disclosed publicly, nor will the company comment on speculation related to those discussions," spokeswoman Tracy Fuerst said.

DaimlerChrysler stock rose US$4.76, or 6.1 percent, to close at US$82.36 on the New York Stock Exchange on Friday. It has traded in a 52-week range of US$45.98 to US$77.99.

DaimlerChrysler's US employees, meanwhile, were shaken on Friday as reports swirled about a bid being prepared for Chrysler.

"It's kind of nuts," said one Chrysler employee, who asked not to be identified.

"We still have jobs to do but when people don't know what's happening, it's very difficult," said the employee at the company's big Jefferson North assembly plant in Detroit.

"Employees are very suspicious of the motives of both Magna and Cerberus," said one union official in Auburn Hills, Michigan, the headquarters of Chrysler. "They don't like it."

Chrysler officials have acknowledged privately that morale has sunk since the announcement last month that the company might be for sale.

Many Chrysler employees are deeply mistrustful of private equity groups such as Cerberus and Blackstone, the nation's largest private equity fund.

Employees and union officials fear a new owner might slash benefits and possible jeopardize the employee pension fund.

"As of right now, the pension fund is fine. But what happens when there are no more employees to pay into it?" another Chrysler employee said.

Tom LaSorda, Chrysler Group chief executive officer, tried to address the sinking morale in an e-mail this week.

"Here at the Chrysler Group, we are operating in unique circumstances as news reports continue to circulate about our potential future direction," he wrote.

"While we have been through turnarounds before, in some respects the current situation is unprecedented because of the uncertainty involved."

LaSorda added that "whatever our future situation will be, we need to succeed as a team with our Recovery and Transformation Plan."

There has been growing speculation that Chrysler, which Daimler-Benz AG acquired for US$36 billion in 1998, might be sold off in the face of its deep losses. But, industry analysts have placed its value at anywhere from nothing to US$13.7 billion.

The 1998 "merger of equals" created a group valued at US$92 billion and was described at the time as the largest industrial fusion in corporate history.
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