Geneva Auto Show: Zetsche Offers Tidbits on Potential Chrysler Sale
March 06, 2007

DaimlerChrysler CEO Dieter Zetsche provided a glimpse of what went on behind the scenes leading up to the Feb. 14 announcement that the German automaker is “exploring all options” in regard to Chrysler Group, including its possible sale.

Zetsche told a small group of reporters at a briefing at the Geneva Motor Show that he could not and would not comment on specific speculation and rumors regarding the possible sale of Chrysler and potential suitors, but he did confirm the following:

DaimlerChrysler and General Motors had explored how they could collaborate about nine months ago -– at GM’s instigation;

The United Auto Workers (UAW) union’s refusal to provide Chrysler with the same concessions in health care that it gave to GM and Ford played a key role in DaimlerChrysler deciding to “exploring all options,” including Chrysler’s sale;

DaimlerChrysler has spent the past 14 months considering the best option for the automaker as a whole and its individual components. Not only was the sale of Chrysler Group on the table, so was consideration of the sale of other divisions, specifically the truck group.

Zetsche said the decisions to “explore all options” for Chrysler did not occur in the three days leading up to the Feb. 14 announcement. Rather, Zetsche, after taking over as DaimlerChrysler CEO, spurred an exploration of every segment of the automaker starting 15 months ago.

“To further assure the safe and successful future for Chrysler and DaimlerChrysler, we couldn’t limit ourselves to the status quo,” he said. So everything, for all divisions, was put on the table. Options considered included the sale of the truck division and the Chrysler Group.

Consideration for selling Chrysler gained momentum last spring when Chrysler sales, which had hit targets for the first three months, nosedived in April. What was thought to be a one-month phenomenon continued into May and beyond. As sales slowed, inventories surged. Incentives and an ad campaign, starring Zetsche as Dr. Z boasting about Chrysler’s German connections, failed to reverse the trend.

In addition to the accelerated deterioration of Chrysler’s performance, the UAW refused to give Chrysler the same break on health care that it gave to GM and Ford, citing Chrysler’s healthier financial situation as its reason. “I’m not saying it made the difference in the outcome, but it gave us a new piece of information to consider,” Zetsche said.

Zetsche said he had to insist publicly that Chrysler was not for sale, during last fall as speculation mounted and even a week before the Feb. 14 announcement.

Zetsche insists he is not under pressure from his supervisory board to sell Chrysler. He further insists he is not fearful of losing his job. A CEO who is fearful for his job is apt to make the wrong decisions for the company, he said.

Asked if he feels responsible for Chrysler’s situation, since he helped turn the company around the first time in the early part of the decade as its CEO, Zetsche said he’s proud of the company’s progress, which was faster than its competitors. “Then the bar was raised, the competitors were going faster, and Chrysler’s pace was not sufficient.”

As for a private equity firm trying to buy DaimlerChrysler if Chrysler is spun off, Zetsche said its best defense is a strong performance, which boosts its market value. Indeed, he acknowledged the equity firms are recognizing the potential value of Chrysler and DaimlerChrysler. Zetsche put the company’s market capitalization at $50 billion.

Zetsche acknowledged the uncertainty surrounding the future of Chrysler and its potential sale is hurting its vehicle sales in the U.S. Chrysler has increased to 40 percent from 30 percent. Zetsche defended higher fleet sales saying it still was a lower rate than one of its Detroit rivals.

Zetsche said Chrysler would remain focused on its goal to improve its financial situation by $4.5 billion, 80 percent of which will be achieved through cost cuts and 20 percent through revenue. He said Chrysler would march on with its recovery plan, laid out in February, to become profitable in 2009 and earn a return on investment of 2.9 percent. Zetsche said upside potential for Chrysler could be in expansion into international markets and partnership opportunities, like the one recently announced with China’s Chery.

“Chrysler will deliver on its targets,” Zetsche declared.

Posted by Michelle Krebs at 2:35 AM under Chrysler , Featured , News | Comments (0) | digg this | Seed Newsvine