Buyout firm meets with Chrysler

Discussion in 'General Motoring' started by Jim Higgins, Mar 6, 2007.

  1. Jim Higgins

    Jim Higgins Guest

    Buyout firm meets with Chrysler
    http://www.detnews.com/apps/pbcs.dll/article?AID=/20070306/AUTO01/703060364/1148

    Buyout experts from Cerberus Capital Management met Monday with Chrysler
    Group executives to evaluate a possible bid for the troubled U.S. division
    of DaimlerChrysler AG, according to people close to the situation.

    Cerberus, a leading private-equity firm, is the first Wall Street investor
    to visit Chrysler headquarters in Auburn Hills for an in-depth review of the
    automaker's finances and operations.

    A second private-equity powerhouse, the Blackstone Group, is scheduled to
    meet one on one with Chrysler management later this week, people familiar
    with the matter told The Detroit News.

    The meetings suggest that the sale process for Chrysler is entering a
    critical phase, as big-money investors begin to dig deep into the prospects
    of purchasing the one-time No. 3 U.S. automaker.

    Chrysler was essentially put up for sale Feb. 14 when DaimlerChrysler CEO
    Dieter Zetsche announced that "all options" were being considered for the
    struggling automotive icon.

    Seperately, Monday, Zetsche said he does not rule out selling Chrysler
    Financial, the finance arm of Chrysler, as it considers all options for the
    U.S. division.

    "In case we would decide for an option that would change the current
    structure for the Chrysler Group, we have the option to do the same for the
    financial arm or not," he said during a Merrill Lynch Global Automotive
    Conference in Geneva, broadcast on the Internet.

    Cerberus and Blackstone could be joined in a bidding war by other investment
    groups as well as General Motors Corp, which has been in discussions about
    acquiring Chrysler since December.

    A spokesman for Cerberus in New York declined comment Monday about the
    on-site visit at Chrysler. "We routinely don't comment on market rumors and
    speculation," said Peter Duda of Cerberus.

    Chrysler spokesman Jason Vines also declined to comment Monday.

    But sources told the News that both Cerberus and Blackstone are considered
    serious contenders to buy Chrysler, which has ridden a roller coaster of
    profits and losses since being acquired in 1998 by German automaker
    Daimler-Benz AG.

    Also, both firms are said to be interested in hiring former Chrysler
    executive Wolfgang Bernhard to assist in a turnaround of Chrysler, which
    lost $1.5 billion in 2006.

    Bernhard, a former chief operating officer at Chrysler, has been targeted by
    Cerberus and Blackstone as a possible executive or high-level consultant,
    according to people close to the Chrysler sale process.

    Speculation about Bernhard's automotive future has been rife since the
    German exec resigned in January as head of the Volkswagen brand. He could
    not be reached for comment Monday.

    The interest in Chrysler by private-equity giants such as Cerberus and
    Blackstone underscores the potential that investors see in the automaker,
    which sold 2.7 million vehicles last year and posted revenues of $62
    billion.

    An investment firm could take Chrysler private, restructure its operations
    and then sell its stock to the public or possibly to another automaker.

    Cerberus has been an increasingly aggressive player in the auto sector, with
    former Ford Motor Co. executive David Thursfield spearheading its auto
    investment activities. Thursfield did not participate in the meetings
    Monday.

    Last year, the firm agreed to buy a 51 percent stake in GM's highly
    profitable finance business. Cerberus is also leading a group of investors
    attempting to buy bankrupt parts supplier Delphi Corp.

    Blackstone also has a taste for the industry. In 2003, the firm acquired the
    automotive operations of TRW Inc. for $4.7 billion and later took the
    company public. Blackstone owns a 56 percent stake in Livonia-based TRW
    Automotive Holdings, the largest manufacturer of auto-safety equipment.

    With an estimated $125 billion in capital to spend on companies, Blackstone
    Chairman Stephen Schwarzman was crowned the "new King of Wall Street" in the
    latest issue of Fortune magazine.

    Other private-equity firms or rival automakers could join the hunt for
    Chrysler, according to people familiar with the process.

    DaimlerChrysler has engaged investment banker J.P. Morgan Chase to handle
    any prospective deals.
     
    Jim Higgins, Mar 6, 2007
    #1
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