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Asian link likely for Chrysler

From freep| April 02 , 2007

Private equity firms sniffing around the Chrysler Group could likely have an Asian partner in the wings to help take advantage of potential growth in China or India, merger and acquisition experts say.

Two big-name firms -- Blackstone Group and Cerberus Capital Management -- have been reviewing Chrysler's finances in preparation of potential bids, which are supposedly due at the end of this week or soon after.

"The chess game is to use the know-how of Chrysler as a base, to sell Chrysler Group vehicles into India and China, and to use the Chrysler platform to distribute Chinese and Indian cars into North America and Europe," said Brian D. Krasicky, a Bloomfield Hills-based expert in automotive industry restructuring and turnarounds for O'Keefe & Associates.

"One cannot dismiss the Korean automakers using Chrysler as a platform," he said, "but I think it's all about China and India."

Chrysler Group is already teaming up with Chinese automaker Chery Automobile Co. to bring less-expensive small cars to North America.

Any talk about whether private equity firms are quietly teaming up with an Asian auto manufacturer is purely speculative at this point, but several industry analysts say it's a likely theory.

The companies supposedly talking with DaimlerChrysler about a purchase have not been discussing their efforts.

"The moves -- regardless of the buyer -- will be to use Chrysler as a platform ... to penetrate the Indian and Chinese markets," Krasicky said.

Van Conway, senior managing director with Conway, MacKenzie & Dunleavy, agreed the idea makes a lot of sense. "The question is who that might be," he said. "Clearly as the China market evolves in the next 10 years or so ... on paper it would make a lot of sense."

He added: "As we continue to evolve toward a global economy, that would be a good strategic fit for a buyer of Chrysler."

Michael Raab, an auto industry analyst with Sal. Oppenheim in Frankfurt, Germany, added: "It's not a secret that the Chinese want to make their inroads into the U.S. market as well as the western European market big-time," Raab said. "For the Chinese, it would make sense."

No names have popped up as possible partners. "You couldn't rule out that any Chinese isn't teaming up with private equity as a silent partner," he said. "I am just speculating."

Speculation about Chrysler's future has pushed DaimlerChrysler stock to levels that haven't been seen in years. It closed at $81.56 Thursday, up 57 cents. .

On Feb. 14, DaimlerChrysler Chairman Dieter Zetsche announced that all options are on the table for Chrysler Group, including a possible sale.

The company has reportedly hired JPMorgan Chase as its financial adviser. Magna International Inc., a Canadian auto-parts supplier, has expressed an interest in Chrysler.

An analyst with KeyBanc says Magna has put in an offer for Chrysler at $4.6 billion to $4.7 billion -- considered a low offer. Magna is supposedly looking for a private equity partner to do the deal.

Daimler-Benz AG paid about $40 billion in 1998 for Chrysler Corp. in what was at the time called a marriage of equals.

Chrysler has struggled in the past year. It posted a $1.5-billion loss in 2006 and is undergoing its second major turnaround plan in the past decade, which involves cutting 13,000 jobs, shutting an assembly plant and reducing vehicle production by 400,000.

First-round bids are expected by the end of this week, according to reports from Europe. DaimlerChrysler officials have been working to dampen expectations of a significant announcement at the company's shareholder meeting in Berlin next week.


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