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Daimler to buy Asian truck units

New trucks await delivery in the compound of the Mitsubishi Motors Co plant in Kawasaki, Japan, in this file photo. DaimlerChrysler AG yesterday announced that it will take stakes in commercial vehicles businesses being spun off by Japan's Mitsubishi Motors Corp and South Korea's Hyundai Motor Co. PHOTO: AP

DaimlerChrysler AG agreed to pay 1.16 billion euros (US$1.14 billion) for a 43 percent stake in Mitsubishi Motors Corp's truck unit and a 50 percent share of Hyundai Motor Co's unit to expand in Asia.

Stuttgart, Germany-based DaimlerChrysler will pay 760 million euros for the stake in Mitsubishi's Fuso unit, it said in a statement to the Frankfurt exchange. The company will buy the Hyundai truck stake for 400 million euros.

Asia is the fastest growing market in the world for commercial vehicles. It will account for 50 percent of all sales during the next decade, compared with 43 percent now, the German company said. DaimlerChrysler has 20 percent of the world market, manufacturing 493,000 vehicles last year.

"Strategically it's a good move," said Pierre-Yves Quemener, an analyst at CIC Securities in Paris, who has an "underperform" rating on Daimler's stock. "On the other hand, it's going to put pressure on their cash situation, especially after the restructuring of Freightliner, and it takes time to integrate these acquisitions." DaimlerChrysler's shares rose as much as 1.05 euros, or 2.8 percent, to 38.50 euros and traded at 38.19 euros in early morning trade in Frankfurt yesterday.

The decision comes after weeks of speculation that the German car and truck maker would step in to help Fuso, which has been struggling with slumping demand, as well as to boost its Asian business. DaimlerChrysler owns 37 percent of Mitsubishi Motors, where it has already installed German managers.

The world's largest truckmaker said Fuso will be a separate unit from next year, which will be called Mitsubishi Fuso Truck and Bus Corporation. DaimlerChrysler will appoint four of eight members of the management board, including the chief financial officer and the chief operating officer.

The German company named Wilfried Porth, former head of the company's bus production in Brazil, as Fuso's chief executive, repeating a pattern of giving German managers control over acquisitions.

DaimlerChrysler has installed German managers at Mitsubishi Motors, US truckmaker Freightliner and the Chrysler car unit.

The company took a minority stake in Fuso to keep the Japanese truckmaker's debt off its balance sheet, analysts said.

DaimlerChrysler made Rolf Eckrodt Mitsubishi's chief operating officer when it took its stake in 2000. Eckrodt became president this year.

"By expanding in Asia, we can implement our strategy of `turning scale into profit' -- in other words reaping the benefits of economies of scale -- even more rigorously," said Eckhard Cordes, head of DaimlerChrysler's truck business, in a faxed statement.

The two companies will work together in development, sharing components and "major" assembly operations as well as using common parts worldwide, DaimlerChrysler said.

Mitsubishi Motors wants to strengthen its truck unit, its most profitable business. The Japanese automaker is set to post its second annual profit in the 12 months ending March 31 next year.

Mitsubishi Group will acquire a 15 percent stake in Fuso trucks, while Mitsubishi Motors will maintain a 42 percent stake, DaimlerChrysler said. The transaction is subject to approval by shareholders at the end November.

Fuso employs 17,477 people and posted sales of 5.9 billion euros last year. The company last year built 140,000 vehicles, of which 50 percent were exported. Hyundai's truck unit had 1.2 billion euros in sales last year, building 42,900 vehicles of which 23 percent were exported. It employs 4,900.
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