By JUSTIN HYDE FREE PRESS BUSINESS WRITER
Created: 2/14/2007 1:04:38 PM
Updated: 2/14/2007 1:05:20 PM
The list of possible suitors who might be interested in shearing Chrysler Group from DaimlerChrysler AG is quite long - but begins with “no one.”
The statement today from DaimlerChrysler that it was considering all options for Chrysler ignited speculation about what kind of investors might be interested. But analysts have long held mixed views about whether Chrysler could survive after nearly 10 years of Daimler oversight.
That's because a standalone Chrysler would face the exact kind of problems that its managers dealt with for decades prior to the 1998 merger: a lack of scale to lower costs, fewer engineering resources than its major competitors and periodic cash crunches like the one that nearly threw it into bankruptcy in the late 1970s.
And market pressures have only grown stronger since the merger, with most automakers aiming to design and build vehicles on a global scale, such as Toyota Motor Corp. does with its Corolla.
“The problem with Chrysler is in a sense, it's only a one-trick pony,” said Joseph Phillippi, head of AutoTrends Consulting in Short Hills, N.J. “It's really just a North American car company.”
Banc of America analyst Ron Tadross disagreed, saying Chrysler's modest size - with an equity value of just $5 billion - and fairly competitive position against General Motors Corp. and Ford Motor Co. could motivate several shoppers.
“The size of the business is more consistent with that of other automakers around the world that have been turned around successfully (like Fiat and Nissan),” Tadross said in a research note.
Who might take an interest? Here's a short list:
• Renault-Nissan. Carlos Ghosn's combine has hit a rough patch in recent months, but the talks with GM last year revealed Ghosn's desire for an even larger North American base. A Chrysler tie-up would give him access to additional factories and engineers. But it would create serious competitive issues in North America between Chrysler and Nissan-Infiniti, and to a lesser extent in Europe, where Chrysler is trying to bulk up sales.
• Chinese automakers. Chrysler's deal with China's Chery Motor Co. will likely be just the beginning of joint ventures between established automakers and Chinese upstarts for vehicles outside of the Chinese market. Chinese auto companies have bought extinguished British auto brands such as MG and Rover (now Crewe), and the Chinese government has hundreds of billions of U.S. dollars that could be put to use.
While such a deal would give a Chinese owner an instant global business, it would also spawn a new level of management and political issues, such as how to balance production between Chinese and North American factories.
•Kirk Kerkorian. The 89-year-old billionaire folded his hand in GM last year, and has made a run at Chrysler before. But many analysts believe his failed attempt to spur more change at GM has soured him on the industry.
•Other European automakers. Other European automakers aren't immune to the concerns that drove Daimler to buy Chrysler back in 1998, and in the face of an ever-stronger Toyota might explore some alternatives.
Fiat SpA has turned around its auto business after several years of toil, and lacks a broad access to the U.S. market. But any such move would have to win over European shareholders who are soured on DaimlerChrysler.
•Private equity. Hedge funds have been snapping up companies left and right, and it's likely at least a couple have run some numbers on Chrysler. While a private conglomerate would bring capital and perhaps some management expertise, it would still face Chrysler's core issues, and have to haggle over investment returns with the United Auto Workers.
•Ford. Back in the late 1990s, Ford's board of directors considered a Chrysler merger for 10 minutes before dropping the idea. It's hard to imagine how Chief Executive Alan Mulally would want to add to his workload of saving Ford, but the thought may get another 10 minutes in Dearborn.