Chrysler shares at $86 may be end of run-up


May 18, 2007|By Tim Higgins | Tim Higgins,Detroit Free Press

DETROIT -- After a tremendous run-up, shares of DaimlerChrysler AG may have peaked yesterday, as traders appear to have decided that selling Chrysler was fun, but now it's time to cash out and sell those shares.

Just three months ago, on Feb. 13, the day before DaimlerChrysler AG first hinted the Chrysler Group might be sold, the stock opened at $63.94.

Now that a deal has been announced for private equity firm Cerberus Capital Management to acquire Chrysler, DaimlerChrysler's shares are going for more than $86 - a 34 percent increase in just three months.

Kevin Tynan, an analyst with Argus Research, advised his clients to sell now.

"With the German faction of DCX finally casting off the unwanted Chrysler Group, the current price of the shares should encourage investors to take profits and have a good laugh all the way to the bank," he said in a note yesterday. It appears that the market agreed: After rising 9.7 percent from May 10 through Wednesday, DaimlerChrysler shares slipped 66 cents, or 0.8 percent, to $86.02 yesterday.

The sale of Chrysler is a deal that German shareholders demanded for some time. In Germany, it's being called "Daimler's $27.5 billion lesson" - a reference to the fact that Daimler-Benz AG spent about $36 billion to acquire the Chrysler Corp. in 1998.

Zetsche says Chrysler contributed $11 billion to the company over the past nine years. Through the deal, Daimler will be getting rid of $17.5 billion in estimated health care liabilities for Chrysler workers.

In related news, the Pension Benefit Guaranty Corp., the federal agency that insures private pension plans for millions of Americans, said yesterday that DaimlerChrysler AG's Daimler unit had agreed to pay $1 billion into Chrysler's pension plan if it is terminated within five years.

Vince Snowbarger, interim PBGC director, said DaimlerChrysler and Cerberus Capital Management LP had made "significant financial commitments" to ensure the pensions of Chrysler workers as part of the agreement.

Under the new ownership of Cerberus, Chrysler will contribute $200 million to workers' pensions during the next five years beyond the required minimum payments.

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