Geneva Motor Show: Arena for More Chrysler Speculation
March 05, 2007

As the city hosts the media for its annual motor show, Geneva, Switzerland, will provide this week’s arena for speculation on who will buy Chrysler, speculation that has turned into an international sport.

This week’s front-runners for Chrysler are said to be private equity firms. The Blackstone Group LP is generating the most buzz.

Wolfgang Bernhard, former Volkswagen and Chrysler executive, is reportedly talking with private equity firms about an advisory role to guide them in purchasing Chrysler.

The white knight scenario of the week goes to Toronto-based auto supplier, Magna International.

Analysts are warming up to a General Motors' takeover of Chrysler if it involves an equity arrangement.

The Chinese remain a long shot.

Word out of Germany is that DaimlerChrysler is considering retaining Chrysler’s family jewel, Jeep.

And who knows what else will emerge this week?

Private Equity Firms

The Detroit News is reporting the Blackstone Group, a New York private equity firm, is the leading contender for Chrysler, particularly since it has automotive experience and $125 billion available. The News, citing unnamed Chrysler sources, contends Blackstone is conducting a detailed analysis of Chrysler; Blackstone is not commenting.

Adding fuel to the fire, this week’s Fortune Magazine features on its cover the head of Blackstone, Stephen Schwarzman, as the “New King of Wall Street.” Blackstone owns 56 percent of TRW Automotive Holdings Inc., which it took public in 2004. It also bought control of Detroit-based auto supplier American Axle & Manufacturing Holdings Inc. in 1997 and later sold its shares in public offerings.

Other private equity firms, including Cerebrus Capital Management LP, which has former Ford exec David Thursfield at the helm of its automotive division, can’t be ruled out. Indeed, the Detroit News reported Cerebrus also has been given Chrysler’s data for consideration. Cerebrus recently has purchased stakes in GMAC Financial Services and other automotive suppliers.

On Sunday, the Financial Times of London reported Cerberus as well as Carlyle, Apollo Management and Ripplewood as likely candidates.

Auto Supplier Magna

Some media outlets, most prominently this week Automotive News, put auto supplier Magna International at the forefront, in a page one profile of Magna CEO Frank Stronach. The trade journal painted Stronach as a white knight who would rescue Chrysler from falling into the hands of private investment groups that might put price pressure on Magna or replace it with other suppliers. Stronach, controlling shareholder of Magna, has been publicly expressing his desire to assemble automobiles for the past couple decades.

Part of Magna's motivation is defensive -- 26 percent of its sales come from Chrysler. Magna, of Aurora, Ontario, posted total sales last year of $24.18 billion.

A meeting between DaimlerChrysler’s Zetsche and Magna’s Stronach on Feb. 14, the day Zetsche announced Chrysler could be sold (in not so many words), kicked off speculation about Magna. Further, company executives quoted by the Financial Times last week didn’t deny the possibility. “It’s open discussion on a lot of topics, including Chrysler right now,” the executive said.

DaimlerChrysler is Magna’s biggest customer, contributing about a quarter of its $24 billion annual sales last year; GM is Magna's second largest customer. Magna ranks third in the world among global auto suppliers, according to Automotive News. Magna also assembles Mercedes-Benz and Chrysler vehicles, among others, at a plant in Austria.

GM-DaimlerChrysler Stock Deal

Initially, the idea of GM buying Chrysler was condemned as ludicrous. But analysts being quoted across the world are warming up to the idea, if it involves an equity stake. They see a sharing of resources for such things as future technology development as a plus.

Chinese: The Long Shot

The Chinese media have been reporting that three companies –- Chery, Shanghai Automotive Industry Corp. (SAIC) and First Auto Works -- have held discussions with Chrysler. All have expressed global ambitions; all have denied any plans to consider buying Chrysler.

Chrysler Without Jeep?

The German business daily Handelsblatt reported late last week that DaimlerChrysler may keep global icon, Jeep. Quoting unnamed company sources -– as everyone is doing these days -– the paper said the Jeep brand would be pulled out of Chrysler and held as an independent niche marque with DaimlerChrysler.

It’s hard to imagine a buyer would want Chrysler Group without the crown jewel.

Where Will Wolfgang land?

The media will be on the lookout during the Geneva Motor Show for an appearance by Wolfgang Bernhard, said to be discussing a role as adviser on a possible bid for Chrysler with several private equity firms. Smart move to go after him, and the firm –- or firms –- who ultimately land Bernhard will have a major asset.

Highly respected in both the U.S. and European car industries, Bernhard knows Chrysler better than almost anyone. He was its chief operating officer in the early part of the decade under Zetsche. He did the nitty gritty work of turning it around, before going to Volkswagen in 2005. He left VW in January and hasn’t turned up yet, but is fully expected to take on a big job somewhere in the industry.

Too Soon to Tell

Frankly, naming anyone as a leading contender is premature, presumptuous and preposterous at this point.

DaimlerChrysler’s investment banker, JPMorgan Chase & Co., has only started disseminating private internal Chrysler data to potential suitors. And DaimlerChrysler CEO Dieter Zetsche only last week wrapped up his annual investor relations road show that took him to London, New York and Boston. The automaker called his travels “100 percent routine.”

Nothing is routine in these times.

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