Chrysler-GM `unlikely'

February 17, 2007|By Detroit Free Press

DETROIT -- News that DaimlerChrysler AG was discussing the possibility of selling the Chrysler unit to General Motors Corp. cheered its mostly German stockholder base yesterday, but drew jeers elsewhere.

Analysts and industry executives questioned why GM, whose own turnaround efforts are still under way, would use some of its $26.4 billion in cash raised by selling profitable assets such as GMAC to buy another unprofitable North American automaker.

The companies declined to comment on the reports.

"Anything's possible, but this one seems unlikely," said John Casesa, a longtime auto analyst and managing partner of Casesa Strategic Advisors LLC. in New York. "It would increase exponentially the challenges GM faces in turning around the company. These two companies have an immense amount of overlap in people, plants, dealers and products, and there'll be very considerable cost in working through all that."

Shares of DaimlerChrysler gained $3.08, or 4.4 percent, yesterday to close at $73.33 on the New York Stock Exchange, and have gained 13.8 percent since DaimlerChrysler Chairman Dieter Zetsche first said all options were on the table concerning Chrysler's future.

German shareholders own most DaimlerChrysler shares, and advocates have argued for years that reversing the merger would restore Daimler's steady profits.

But Ronald A. Tadross, a Banc of America Securities analyst, said a combined GM-Chrysler would be a hodgepodge of 15 brands and 10,000 dealers, compared with main rival Toyota Motor Corp.'s three brands and 1,500 dealers.

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