said GM has been in exploratory talks with Chrysler and those discussions have focused on a possible collaboration between the two automakers on sports utility vehicles. Some industry sources say they are skeptical GM would ultimately agree to buy Chrysler.
Meanwhile the Detroit News Monday quoted unnamed people familiar with the negotiations, who have said the chief executives of both GM and DaimlerChrysler began two months of talks in December about the sale of Chrysler. The Detroit News said the discussions remain at an early stage, but at least four meetings have already taken place including some with the top leaders of the two companies.
South Korea’s Hyundai, the world’s sixth largest automaker, has said it is not considering buying Chrysler because it already has its hands full with other projects such as investment it is already making in the Czech Republic and the U.S.
Morgan Stanley said its sum-of-parts approach valued Chrysler at 7 billion euros, or about US$9.2 billion, including healthcare liabilities, or at between 3 billion and 5 billion euros based on a leveraged buyout model and including its pension and healthcare burden.
"A 5 billion euro equity value for the Chrysler division would be just over 10% price/sales, making Chrysler the cheapest car company in the world on our numbers, less than half the value of PSA," it said in a note to clients. "Including the value of the Financial Services assets attributable to Chrysler could be another 5 or 6 billion euros on our estimates," it said.
To Sell or Spin Off
Analysts at Bank Sal. Oppenheim said a GM purchase of Chrysler would add economies of scale for research and development, purchasing and production and also offer potential to eliminate overcapacity -- a chronic problem that helps fuel a price war in North America.
But that would require plant closures and tens of thousands more job cuts in an industry already reeling from restructuring at GM, Ford, and Chrysler.
Analysts have pointed to Chrysler's unionized workforce, unfunded health and pension liabilities and hefty losses as reasons for investors to think twice about taking on any financial exposure to the number-three U.S. carmaker.
They say DaimlerChrysler could also choose to unwind the 1998 merger between Daimler-Benz and Chrysler by spinning Chrysler off to shareholders or floating part of it on the stock market.
Sal. Oppenheim estimated it would cost around 22.5 billion euros for DaimlerChrysler to divorce itself from Chrysler -- 13.9 billion to finance the pension and healthcare plans and 8.6 billion more to beef up Chrysler's balance sheet.
It suggested the group could raise more than 5 billion euros by selling surplus property and borrow the rest via bond issues.
Chrysler could also be attractive to rivals hungry for more production capacity in North America such as the the Renault/Nissan alliance the bank said.
"The same applies to cost savings out of scale economies in the case of tying up with GM. These 'assets' would clearly lower the cash injection DCX would have to make, so we believe, therefore, facilitating a Chrysler disposal the market would clearly applaud," it added in a research note.
DaimlerChrysler Chief Executive Dieter Zetsche told reporters last week that all options for Chrysler were on the table, but the company has declined to comment further. JP Morgan is advising the company as it evaluates options for Chrysler, according to a source familiar with the matter.
Stung by an over-reliance on pickup trucks and sport utility vehicles at a time of high fuel prices, Chrysler swung to an operating loss of 1.12 billion euros last year.
It is responding by cutting 13,000 jobs, or 16% of its workforce, reducing production capacity and shifting its product focus to more fuel-efficient vehicles and engines.