Round 2: Where's Tracinda?

Today in New York, the man leading the Chrysler auction is beginning meetings with those firms pursuing the American automaker. Two private equity companies, Blackstone Group and Cerberus Capital, as well as Canadian auto parts maker Magna corp. will all meet with Daimler executives to discuss round two of the Chrysler auction. But so far, it appears as though Kirk Kerkorian's Tracinda Corp is not being invited into the tent. Which brings up the question of why Tracinda is being excluded and if so, what's Kerkorian's next move?

First, Daimler may not want to negotiate with Tracinda for a whole host of reasons. Kerkorian's bid of $4.5 billion has been deemed by some as being unimpressive. Maybe, maybe not. $4.5 Billion by itself doesn't tell us much. We need to know how much of Chrysler's $18 billion in liabilities would also be picked up by Tracinda. Then there is the issue of whether the UAW will work with Tracinda to restructure it's contract. Buzz Hargrove, the president of the Canadian Auto Workers say he doesn't want to deal with Tracinda. But it's still unclear if the UAW feels the same way. Finally, does Daimler think it can do business with a Tracinda owned Chrysler? Remember, whoever owns Chrysler will still have an extensive relationship with DaimlerChrysler, and to an extent, there has to be a sense the companies can work together.

Second, Tracinda is not out of the game. Kirk Kerkiorian and his top advisor Jerry York still have other options. They can sweeten the bid or they could form a partnership for a richer offer with another company. And those are just two of the most obvious possibilities.

The point is, round two of the Chrysler auction may just be starting, and while it looks like Tracinda is out of luck, anything can happen. Kirk Kerkorian and his people are patient and won't be deterred by a few setbacks.

Questions? Comments?