Detroit Diesel wants to buy back automaker's stake

Company says it desires to remain independent

April 29, 1999|By BLOOMBERG NEWS

DETROIT -- Detroit Diesel Corp., the world's No. 2 maker of high-power diesel engines, said yesterday that it wants to buy back automaker DaimlerChrysler AG's 20 percent stake in the company, valued at $120 million, and remain independent.

Chairman Roger Penske issued the statement in response to DaimlerChrysler Co-chairman Juergen E. Schrempp's recent comment that he would like to take control of Detroit Diesel. Schrempp's counterpart, Robert J. Eaton, said yesterday that the company has not made any decisions about Detroit Diesel.

"We want to reiterate our intention to maintain an independent path in the marketplace," Penske said.

Closely held Penske Corp. bought Detroit Diesel from General Motors Corp. in 1987. The company went public in October 1993 and has been profitable each year since, while expanding into generators and marine engines. Its customers include DaimlerChrysler's truck unit, Freightliner Corp.

Automotive News quoted Schrempp as saying that DaimlerChrysler "would very much like to acquire the majority or take over the whole of Detroit Diesel." Schrempp made the remark at a news conference in Germany last month after 18 months of talks between DaimlerChrysler and Nissan Motor Co. broke off and DaimlerChrysler elected not to buy a stake in the Japanese automaker or its truck unit.

DaimlerChrysler first gained an 11.4 percent stake in Detroit Diesel by converting $40 million in cash that it had provided for an engine development, manufacturing and distribution program in October 1993, and later boosted its stake by buying 2.4 million shares for $38.6 million in September 1997.

Detroit Diesel had 24.7 million shares outstanding March 1, valuing DaimlerChrysler's stake at $120 million based on yesterday's closing price of $24.25. The shares are up 17 percent this year.

Pub Date: 4/29/99

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