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Report: DCX considers trading Chrysler Group for stake in GM

From FREE PRESS BUSINESS | February 27,2007

DaimlerChrysler AG is considering selling the Chrysler Group for a stake in General Motors Corp., according to a report in Monday’s Financial Times.

DaimlerChrysler, though, also is still considering a cash sale to private equity firms, including Apollo Management LP, Blackstone Group, Cerberus Capital Management LP and Carlyle Group, the London-based business newspaper wrote.
DaimlerChrysler and GM have declined to comment on reports. DaimlerChrysler sparked speculation of the sale of the Chrysler Group two weeks ago when executives said all options were on the table for the Auburn Hills-based unit. The Chrysler Group posted an operating loss of $1.5 billion for 2006.

Several potential bidders have denied interest. Renault SA and Nissan Motor Co., which explored an alliance with GM last year, have said they do not wish to buy Chrysler. Volkswagen AG and Hyundai Motor Co. have said they have no interest in pursuing a deal.

The Carlyle Group, one of the equity firms mentioned in the Financial Times story, also is reportedly not interested in buying Chrysler or working on a deal, according to a source familiar with the matter.

GM has declined to talk about its interest in the Chrysler Group. Analysts say linking GM and Chrysler together would have mixed results. Both are dealing with overcapacity and legacy costs for retiree healthcare and pension expenses. Both also have been hurt by a heavy reliance on trucks and SUVs.

“Unfavorable truck mix (Chrysler 77% vs. GM 61%) stands out as an obvious obstacle but we think the potential to use the deal to negotiate concessions with the UAW could appeal to GM.,” J.P. Morgan analyst Himanshu Patel said in an investors’ note Monday morning.

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