Analysts Scoff At Chrysler Spin-off

[SoCalCTS]

Forbes Article

This is interesting.... It says they have discussing splitting the company for 2 months!

Market Scan

Analysts Scoff At Chrysler Spin-off

Parmy Olson, 02.12.07, 5:35 PM ET

Like someone who has resorted to digging around the back of their couch for spare change, DaimlerChrysler is in such dire need of funds that it should now spin off its loss-making Chrysler unit for the extra cash it could bring in.

DaimlerChrysler (nyse: DCX - news - people ) shareholder DWS said in an interview with the Frankfurter Allgemeine Sonntagszeitung said that Daimler, which divested part of EADS last week, should consider carving off Chrysler. "It would be irresponsible for management to exclude this option," DWS fund manager Henning Gebdhardt said. DWS is a German investment fund that owns 0.85% of Daimler Chrysler.

But analysts think such a move is highly unlikely. "I think it's a bit late now in terms of their technical tie up and all the investment that's been done by the Daimler side of the business," said Global Insight analyst Ian Fletcher in London, who added that a split in the 6-year tie up it would be "devastating" for Chrysler.

The idea of a split between Daimler and Chrysler began around two months ago, said New York-based analyst George Magliano of the same research firm. "It's not pie in the sky. There is dissatisfaction on both sides of the Atlantic." (See: "An Independent Chrysler?")

However Magliano also believes a split would be a bad idea. "There's always been an issue of different culture and management styles and problems of merging an upmarket luxury brand with a volume, middle market brand," said Magliano. "But I think they're starting to come together and to break them apart would be a mistake."

Spinning off Chrysler would also "be like peddling backwards" for DaimlerChrysler's chief executive officer, Dieter Zetsche, said Global Insight's Roman Mathyssek. "It's effectively saying that Chrysler is not worth the investment of restructuring."

And Daimler could find it difficult to get a reasonable price for the division unless it made a big investment into technology. "Selling it is one thing. Getting something for it is another," said Mathyssek

DWS's comments come just before DaimlerChrysler is due to announce its new restructuring plans on Wednesday. Analysts expect Zetsche to announce 10,000 to 11,000 job cuts and the closure of two North American plants.

Germany's Daimler-Benz bought Chrysler in 1998 for $37 billion. The company now makes about 4.6 million vehicles a year including Chrysler's Dodge, Jeep, and Chrysler vehicles, along with the German-made Mercedes and Smart cars.

Shares in DaimlerChrysler were 30 cents, or 0.5%, lower at $63.79, in the early afternoon in New York.

[vrazzhledazzle]

and this comes just after I read an article on Daimler and Chrysler sharing parts and binding closer together.

but Chrysler needs restructuring badly..almost as bad as Ford. the LX cars are the only products from them I'd consider buying

[MyerShift]

But analysts think such a move is highly unlikely. "I think it's a bit late now in terms of their technical tie up and all the investment that's been done by the Daimler side of the business," said Global Insight analyst Ian Fletcher in London, who added that a split in the 6-year tie up it would be "devastating" for Chrysler.

No, it's not too late. And how much investment could Daimler have possibly put into this? If they had, Chrysler would not be where they are now, and their cars wouldn't have such crappy interiors.

As if splitting up would be any more devastating for Chrysler than to stay with Benz which has been draining the life out of it.

Besides, the Mercedes parts that Chrysler does use are probably done so under lisence, and so would continue to have them for some time to come.

[Oracle of Delphi]

Daimler should have never bought Chrysler in the 1st place. Bad move on their part (IMHO). DaimlerChrysler most likely will be announcing the closure of its Newark, Delaware plant tomorrow. Very Sad, since the Newark plant has good UAW relations and productivity is very high. This plant will be missed if they close it.

[AxelTheRed]

Devestating for Chrysler? The article almost makes it sound like if Daimler-Benz cut the Chrysler Group loose it wouldn't be able to produce ANYTHING. The only products that Chrysler would actually loose if it split with Daimler-Benz is the Crossfire and the Sprinter vans...that's assuming of course that Daimler-Benz and Chrysler don't stay partners with each other if they do split, and hell, I hope they do.

[MyerShift]

Devestating for Chrysler? The article almost makes it sound like if Daimler-Benz cut the Chrysler Group loose it wouldn't be able to produce ANYTHING. The only products that Chrysler would actually loose if it split with Daimler-Benz is the Crossfire and the Sprinter vans...that's assuming of course that Daimler-Benz and Chrysler don't stay partners with each other if they do split, and hell, I hope they do.

Exactly. Those are the only vehicles that are made in Europe or are essentially carbon copies of Mercedes-Benz products.

Chrysler's current portfolio is more based on co-developed Mitsubishi architectures than anything else.

I say go for it. Chrysler survived the 1970's and 1980's for God's sake. As if the gloating buffoons in Stuttgart gave Chrysler all that much anyway,

Iacocca I believe has said that if he new Robert Eaton was going to do this to Chrysler, he never would have relinquished leadership of the company...

I agree that Daimler shouldn't have purchased Chrysler. Lord knows Mercedes hasn't done anything for them at all, really.

Did you know that Eaton was earning something along the lines of like at least three times a year as Jurgen Schrempp at the time of the buyout?

[thegriffon]

Transmissions, diesels and the next gen V6 engines are all from Mercedes or DC Commercial Vehicles' VM Motori affiliate.

[MyerShift]

So?

Transmissions? Yeah, one. The five speed automatic, and its built under license, so as long as the contract lasts, Chrysler has access to them. They have the four speed, and the new six-speed and I am sure that there is something else in the pipeline.

Chrysler is playing an important part in the design of said engines, and I am sure that they are more than well underway in development. They're as much Chrylser's as are the GEMA engines co-developed with Hyundai and Mitsubishi or the GS platform (or whatever it's called) that underpins the Sebring, Caliber, Compass, Patriot, Avenger, Lancer, Outlander, next Galant and whatever else there may be.

Edited February 20, 2007 by MyerShift

[Z-06]

Weren't those the same "Anal-ysts" who predicted GM to die by the end of 2006 and Toy to surpass GM as #1 automakers by the end of 2005?

My point is those people are number junkies who do not know the inside of the company and its day to day handling.

I think Chrysler spinoff is a great idea. Chrysler has a lot less to worry than GM regarding liabilities and different brands.

All it needs is the focus on good products, leveheaded marketing and a sound tag-line.

It will far easier to steer the Chrysler ship than SS GM which is showing sighns of coming out of troubled waters.

[Intrepidation]

They should split and Chrysler should be it's own company. Mercedes gave them nothing that they couldn't build themselves or that mattered. An RWD platform was under development to replace the LH cars before the takeover, and the LX is only loosely based on the E-Class. The Crossfire doesn't sell anyway...the worst they could loose is the Sprinter. The engines and transmissions they use are for the most part developed in-house or developed with another company. The 5-speed in the LX cars is the only one that is Mercedes sourced. The companies should be split, and the Chrysler just needs to get concessions like what GM and Ford did, streamline it's management, focus on interiors, and redo some exteriors and they'd be in better shape I think. Screw the Germans.