GM in exploratory talks with Chrysler

GM in exploratory talks with Chrysler
By John Reed in London, Richard Milne in Frankfurt and Bernard Simon in Toronto
Copyright The Financial Times Limited 2007
Published: February 16 2007 21:47 | Last updated: February 16 2007 21:47


General Motors is in exploratory talks with Chrysler after DaimlerChrysler, its German parent, this week said it might sell the struggling US unit.

Other potential suitors for Chrysler, including car companies and private equity groups, have also expressed preliminary interest, insiders told the Financial Times on Friday.

Daimler’s US shares rose as much as 6.1 per cent as rumours of the talks emerged.

The Stuttgart-based German-US company made the approach to GM through its bankers after saying it was considering “all options” for Chrysler, which lost €1.1bn ($1.4bn) last year. “Yes, we are in talks,” a GM insider told the FT. “They started on Wednesday.”

The talks were preliminary, and it remained unclear whether they might result in an offer to buy Chrysler, joint ventures in specific areas, or any deal at all. “We are in a very early stage,” the GM official said.

People close to Daimler said there had been “lots of conversations” with several carmakers since the announcement.

“Everyone you can imagine is going to kick the tyres here,” said one.

The head of a US investment bank in Germany said a number of private equity firms were in discussion with DaimlerChrysler.

It has hired JPMorgan to advise it on its options. A person involved in the talks said no substantive discussions with any potential buyer had taken place but that a range of carmakers and private equity houses were likely to be interested.

Daimler declined to comment. However, there was a feeling at the company that it did not want to be rushed into anything, and wanted to study all options in detail, from an outright sale to a Chrysler spin-off.

GM said: “We do have discussions with other carmakers with issues of mutual interest, but we won’t comment on any speculation of discussions.”

GM, which this year is expected to be overtaken by Japan’s Toyota as the world’s biggest carmaker, last year explored then rejected the possibility of an alliance with Renault and Nissan.

Analysts expressed scepticism on Friday that GM’s shareholders would support the idea of a tie-up with Chrysler, the most focused of Detroit’s Big Three, at a time when both face declining sales in the world’s biggest car market.

GM has not made a full car-company acquisition in its recent history, although, like other groups, it forms ad hoc alliances and joint ventures.

However, “if DaimlerChrysler really want to sell Chrysler, then Rick will have to examine what the potential advantage would be”, the GM official said, referring to Rick Wagoner, chief executive.