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It's decision time for DaimlerChrysler AG

From freep| April 17,2007

Auto industry observers say the company's executives must now decide which direction to take after meeting in New York last week with some interested buyers for the Chrysler Group.

Should they sell the Auburn Hills-based unit that lost $1.5 billion in operating income last year?

Or keep it with the intent of fixing it?

Or sell most of it and keep a little?

Many believe a sale is growing more and more likely, especially after the DaimlerChrysler shareholders meeting earlier this month where German stockholders called for annulment of the 1998 union of Daimler-Benz AG and the Chrysler Corp.

"Normally what the bankers do is that they'll evaluate all of the offers, all of the players," said auto consultant Joseph Phillippi of AutoTrends Consulting. "They'll pick one guy at some point in time to go into intense negotiations with."

DaimlerChrysler, so far, isn't saying what its next step is beyond the routine line that all options are on the table.

Company Chief Executive Dieter Zetsche first put Chrysler's future into flux on Feb. 14, when he announced that all options were being considered and wouldn't rule out selling the struggling unit. This month, he confirmed that talks with interested parties are ongoing.

Zetsche also indicated that whatever the outcome, not all ties would be severed between Chrysler and Mercedes.

DaimlerChrysler officials are believed to have met with three groups in New York: Canadian auto supplier Magna International Inc. and private equity firms Blackstone Group and Cerberus Capital Management.

Another bidder, Kirk Kerkorian's Tracinda Corp., has offered $4.5 billion and wants a 60-day exclusive window to conduct due diligence before finalizing a deal. That offer, however, is not believed to be DaimlerChrysler's first choice. It's not publicly known what the other bidders may want for such an intense research period.

"Tracinda's approach and remarks by" UAW President Ron Gettelfinger "add to the impression that a sale of Chrysler really will happen. The UAW leadership seems to accept that change is inevitable and confirm the union has been offered equity," analyst John Lawson of Citigroup Global Markets said in a note to clients last week.

David Cole, chairman of the Center for Automotive Research, joined other industry experts in cautioning that a final decision could take some time.

"A winner might be a temporary winner," Cole said. "Look back at what happened with Daewoo when they went on the block. GM wanted them. Ford outbid them. Ford went into due diligence then pulled out. GM then got them for a song."

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