Post Number: 1977
|Posted on Thursday, April 05, 2007 - 2:02 pm: || |
Billionaire investor Kirk Kerkorian's Tracinda Corp. on Thursday made a $4.5 billion cash offer for DaimlerChrysler AG's troubled U.S.-based Chrysler unit.
Kerkorian makes offer for Chrysler
Post Number: 335
|Posted on Thursday, April 05, 2007 - 2:07 pm: || |
This information below is from the Merryl Lynch website (account access only) Make sure you read the letters. The details of this transaction have huge implications, including the UAW becoming a partner with Tracinda.
Tracinda Offers to Purchase Chrysler Group
04/05 1:21 am (BW)
Story 1534 (DCX)
LOS ANGELES--(BUSINESS WIRE)--April 05, 2007 --
Tracinda Corporation today announced it has sent a letter to DaimlerChryslerAG offering to acquire the Chrysler Group for $4.5 billion in cash.
Tracinda intends to build and strengthen Chrysler as an independent entity by partnering with the United Auto Workers and senior management of Chrysler, and will offer the UAW and Chrysler management the opportunity to participate as equity partners in the transaction. Tracinda believes by taking a long-term approach to solving Chrysler's problems, it can become a robust and lasting, stand-alone entity.
Attached is the text of the letters sent today by Jerome B. York to Dr. Dieter Zetsche and by Tracinda to the DaimlerChryslerAG Supervisory Board:
Dr. Dieter Zetsche DaimlerChrysler AG Mercedestrasse 137 Stuttgart 2M 70327 Germany
Dear Dr. Zetsche:
I had the chance to meet you briefly at Gary Valade's retirement party in early 2004, and enjoyed our chat at the time, on Toyota pricing as I recall. Of course the several hundred in attendance at that event were in high spirits, as the impact of Chrysler's early 2000's turn around plan was beginning to exhibit remarkable results.
But of course this was three years ago, when gasoline prices were still below $2.00 per gallon in the US, and before three more years of rampant healthcare inflation had taken place.
As Tracinda's letter to DaimlerChrysler's Supervisory Board suggests, we have been following Chrysler closely and studying publicly available materials. And having been a major shareholder for over a decade we are very familiar with both Chrysler and the automotive industry, and have come to believe, all factors considered, that a private ownership approach is in the best interests of all Chrysler constituencies.
The right (meaning exceptionally patient) private ownership can do things that are difficult for both public companies and the wrong (meaning not so patient) private ownership, specifically:
1. Take a very long term approach to solving Chrysler's problems without worrying about "EPS results" for the initial five, six or seven year period it will likely take to build Chrysler into a robust and lasting, stand-alone entity.
2. Offer a substantial portion of equity in the company to the UAW as part of finding a solution to ever-rising healthcare costs, which not only are unaffordable by corporations, but over time will likely prove to be unaffordable by governmental entities as well.
Regarding the first point, the necessary investments will have to be made in product development and manufacturing to (a) get Chrysler on a product renewal cycle that is fully competitive with the Asian producers in terms of newness, (b) shift the product mix towards "greener" segments, and (c) get product quality to the levels necessary to eliminate this as a bias in consumers minds towards purchasing Asian products.
The returns will not come quickly. Investors that feel the need to show "mark to market" results in their funds in relatively short time frames (just a few years) will not be willing to invest as necessary over an unusually lengthy period of time to achieve the necessary end results.
Long term, patient investing has been Tracinda's approach. Aside from its decade-plus investment in Chrysler, it was the controlling shareholder of Metro-Goldwyn-Mayer for eight years from 1996 to 2004, and built the company through film library acquisitions into a public company worth two and a half times its acquisition cost in 1996. And more notably, Tracinda has been the controlling shareholder of MGM Mirage (originally MGM Grand) for twenty years--having built it into a public company with a market capitalization of nearly $21 billion today.
That is what we believe all the Chrysler constituencies need. Not a "quick fix," that may show good results three or so years from now, only to have the company possibly slip into another crisis situation. But a lasting fix that builds on the fundamental requirements in the automotive industry of product newness and quality, and in the process provides returns not only to the investors, but to the employees as well through their ownership stake.
Accordingly, I hope that you and the Supervisory Board will carefully consider the proposal made today by Tracinda Corporation.
Jerome B. York
Supervisory Board DaimlerChrysler AG Mercedesstrasse 137 Stuttgart 2M 70327 Germany
Tracinda Corporation ("Tracinda") has conducted a preliminary due diligence review of the Chrysler Group segment of DaimlerChrysler AG ("Chrysler") by examining publicly available documents. Subject to satisfactory completion of more extensive due diligence, Tracinda is prepared to make an offer to acquire Chrysler for $4.5 billion in cash. Such offer would be subject to reaching a new satisfactory collective bargaining agreement with the United Auto Workers Union (the "UAW"), reaching an equitable arrangement with DaimlerChrysler regarding sharing of unfunded pension liabilities and health care costs of Chrysler retirees, as well as other customary conditions. The offer would not be subject to financing. Tracinda is confident that it will be able to obtain the necessary financing for the offer.
Tracinda intends to build and strengthen the assets of Chrysler as an independent entity by partnering with the UAW and senior management of Chrysler. To this end, Tracinda will offer the UAW and senior management of Chrysler the opportunity to participate with Tracinda as equity partners in the transaction.
Tracinda is prepared to immediately commence a more extensive due diligence review of Chrysler. Tracinda believes that it will be able to complete its due diligence within 60 days. Tracinda is also willing to enter into a confidentiality agreement containing customary terms and conditions. However, prior to devoting the considerable resources necessary to complete a thorough due diligence investigation of Chrysler, Tracinda requires that Tracinda receive an exclusive right to conduct due diligence for 60 days.
In order to demonstrate its good faith and in consideration of the grant of exclusivity Tracinda is prepared to post a deposit of $100,000,000 with a mutually agreed upon escrow holder. If upon completion of its due diligence investigation Tracinda is not willing to pursue a transaction, and provided that Tracinda's due diligence investigation does not reveal that Chrysler has material liabilities not reflected in information publicly available as of today, Tracinda is willing to forfeit $25,000,000 of the deposit. If a transaction is consummated the deposit would be applied towards the purchase price.
Tracinda believes its offer would permit DaimlerChrysler to dispose of Chrysler at an attractive price and enable DaimlerChrysler to focus on its other operations. Tracinda also believes that the experience, expertise and financial strength Tracinda and its team will bring to Chrysler will greatly benefit Chrysler and its employees, suppliers and customers.
We look forward to working with you to consummate a transaction.
Very truly yours,
cc: Dr. Dieter Zetsche
JP Morgan Chase
CONTACT: Sard Verbinnen & Co
Carrie Bloom, 212 -687 -8080
SOURCE: Tracinda Corporation Copyright Business Wire 2007
Post Number: 4200
|Posted on Thursday, April 05, 2007 - 2:16 pm: || |
Is this good or bad?
Post Number: 1978
|Posted on Thursday, April 05, 2007 - 2:26 pm: || |
private ownership isn't a bad idea if someone can swing it, but how can his true intent be determined?
In the past Kerkorian's been known for buying and breaking apart entities
Post Number: 336
|Posted on Thursday, April 05, 2007 - 2:27 pm: || |
In my opinion very good. The company will be private and from what it sounds like Tracinda will be more patient then a company like Blackstone who would need high returns for their investors and would likely sell off Chrysler in pieces.
Tracinda, judging by their letter is more interested in product development and will be patient in turning around the company then German investors.
On another note, since Kerkorian owns MGM, all Chrysler employees will probably be comped at the new MGM downtown. They will be able to take their badges and swipe them into the slot machine card readers.
Just kidding of course but you never know?
Post Number: 2951
|Posted on Thursday, April 05, 2007 - 2:30 pm: || |
The bad news is that Chrysler is probably worth less than $5 billion. That's very small peanuts as far as market capitalization is concerned. Numerous going concerns are worth far, far more than a paltry $4.5 billion.
But again Ford and GM are only worth about $30 to $35 billion combined (perhaps, less). Simply goes to show just how serious the legacy costs (long-term potential liabilities) are to all three of them. DCX surely doesn't want to retain them--so Chrysler goes and the legacy cost burden with its disposal to the next sucker, err buyer.
It's very rare for any such firms to continue with such bad paper. Ford surely would have died a couple years back if the Ford name and logo weren't affixed to the business.
Post Number: 307
|Posted on Thursday, April 05, 2007 - 2:34 pm: || |
If the sale goes through, will we see "Ask Mr. K" commercials? Also, I didn't see anything in the letters about this, but could we, perhaps and hopefully, witness a resurrection of the K Car? The latter would be reason enough for me to approve this deal. The Big Three haven't produced many butt-ugly cars in the last decade or so.
Post Number: 1314
|Posted on Thursday, April 05, 2007 - 2:37 pm: || |
Don't ever tell Lee Iacocca that K Cars are ugly. He still maintains the K car saved Chrysler during the government loan-guarantee days in the early 80s. I wouldn't challenge anything that man says.
Post Number: 337
|Posted on Thursday, April 05, 2007 - 2:39 pm: || |
Lee Iacocca could come back as a member of the board?
Post Number: 4087
|Posted on Thursday, April 05, 2007 - 2:49 pm: || |
I don't necessarily view this as a bad thing. Can Chrysler be "broken up"? Maybe Jeep can be spun off, but I pretty much see everything else as intertwined.
Kirkorian owns MGM, and has built that up into a huge corporation.
This would have been much worse had GM bought Chrysler, then the pink slips would have been everywhere.
I think he sees this as an opportunity to "grow the business".
It is also very shrewd of him to get the UAW very much involved as a stakeholder.
Perhaps he can break the "us versus them" mentality for Chrysler (as found among the Big 3).
Post Number: 9344
|Posted on Thursday, April 05, 2007 - 3:39 pm: || |
Kerkorian would destroy Chrysler as a company! He tried to do the same thing to GM without success. He would divide up the company and sell it off to make money. I don't trust him one bit.
Post Number: 4091
|Posted on Thursday, April 05, 2007 - 3:45 pm: || |
That was my point Goat, can one "divide" up the company the way it is integrated?
He certainly isn't going to just up and sell the buildings. Those in SE Michigan would be on the market for years without buyers...
His track record with MGM and Mandalay Bay seem to be pretty good.
When NYC investment firm of Kohlberg Kravis & Roberts purchased the international conglomerate known as Beatrice International in 1986, they did so because the sum of the parts was worth more than the whole. They split up the company and made a bundle. Of course Beatrice was a bunch of smaller companies that were run as independent entities within a corporate HQ.
If a $4.5 billion investment was such a bargain, don't you think that one of the NYC investment firms would be licking their chops at the prospect of buying & dismembering??
Although I don't know for sure, I do believe that Kerkorian is buying not to dismember, but to enhance his investment by improving the company's value. And the best way to do that would be to "grow the business".
I hardly believe that in the case of Chrysler, the sum of the parts are worth more than the whole. Especially when one looks at all the "legacy costs" of the workers and retirees.
(Message edited by Gistok on April 05, 2007)
Post Number: 726
|Posted on Thursday, April 05, 2007 - 3:48 pm: || |
Isn't Jeep alone worth about 4 billion? That's what I remember hearing.
He could always stabilize and grow the business and then sell it in parts in 7 years. If he thinks he can add value, he probably will. Buy low, add value, sell high(er).
Post Number: 9346
|Posted on Thursday, April 05, 2007 - 3:49 pm: || |
I believe it is possible (though a bit tricky) but the end result would be a fraction of Dodge left and the Jeep name brand and that is about it. I wouldn't be shocked if the Chinese would scoop up the remainder and bring back to their country.
Sure both MGM and Mandalay Bay are good but it is not manufacturing. He might prop up Chrysler for a short period of time until he could make his money.
Post Number: 1979
|Posted on Thursday, April 05, 2007 - 3:54 pm: || |
The MGM Kerkorian bought wasn't known as a gambling entity
He sold off the film library and the studio real estate.
He could easily dismantle Chrysler in the same way.
Post Number: 2955
|Posted on Thursday, April 05, 2007 - 4:00 pm: || |
Although I don't know for sure, I do believe...
What an understatement! You really do not know anything about this. So why pretend that you know something? It's all I believe this or that...
(Message edited by LivernoisYard on April 05, 2007)
Post Number: 9347
|Posted on Thursday, April 05, 2007 - 4:20 pm: || |
LY, most of this is speculative but considering what Kerkorian was going to do to GM it is a very plausible outcome.
Post Number: 696
|Posted on Thursday, April 05, 2007 - 4:23 pm: || |
$60 on a Nissan Chrysler partnership.
God I hope this doesn't turn to be a repeat of what he was trying to do to GM.
Post Number: 339
|Posted on Thursday, April 05, 2007 - 4:49 pm: || |
The response to this news where I work in DCX has been very positive, even from some of the UAW members I spoke with.
Post Number: 476
|Posted on Thursday, April 05, 2007 - 6:00 pm: || |
It's obvious that Kerkorian wants a car company. I say give it to him. At least he is an American who wants to actually run a car company and not just tear it apart for scraps.
Post Number: 4092
|Posted on Thursday, April 05, 2007 - 6:40 pm: || |
For someone who "pretends to know everything", you sure do have your nerve.... haven't lived here in ages, and yet you seem to be the resident expert. I could have used your methodology, and pretended to know it all...
At least if I'm not 100% sure, or I'm guessing, I state it.
But you, you state everything, as though you know it all. Is it any wonder most forumers try to ignore you???
(Message edited by Gistok on April 05, 2007)
Post Number: 2959
|Posted on Thursday, April 05, 2007 - 6:50 pm: || |
I never said I didn't live in/near Detroit. That rumor was initially spread (like manure, apparently) by some ignoramus teacher-type and further spread by types like you...
Post Number: 4093
|Posted on Thursday, April 05, 2007 - 6:53 pm: || |
Regardless, you're still a pompous thinks-he-knows-it-all, who loves nothing better that to make himself seem big, by making others seem small... you sure do love "making a meal out of a morsel"....
(Message edited by Gistok on April 05, 2007)
Post Number: 701
|Posted on Thursday, April 05, 2007 - 6:55 pm: || |
LY, is it remotely possible to say something positive once a week? Or maybe twice a week? Or is that asking too much?
Post Number: 270
|Posted on Thursday, April 05, 2007 - 8:21 pm: || |
I concur with Goat, odds are against Kerkorian revitalizing Chrysler as an automaker. More likely that he intends to flip it, selling pieces off for eventual profit. The biggest financial drain is the labor (union) and labor legacy costs. While not impossible that is a very difficult mountain to climb.
On the other hand, selling off the assets and laying off much/most/all of the laborers in the process is a much faster and easier way to make money. The last thorn is/would be the legacy costs. If he intends to profiteer, he would start out begging the UAW and retirees to give him a break so that he has a chance of making a turn around. Then, once successful, start to tear it down.
He is 89 though and a billionaire, so....maybe he has goals other than money in mind? A positive legacy? Wishful thinking? Probably, we will see.
Post Number: 2010
|Posted on Tuesday, April 10, 2007 - 3:26 pm: || |
Iacocca backs Kerkorian's bid - http://business.timesonline.co .uk/tol/business/industry_sect ors/engineering/article1624345 .ece
I recently read an excerpt from Iacocca's upcoming book - he rips Bush and today's corporate honchos
Post Number: 4970
|Posted on Tuesday, April 10, 2007 - 3:31 pm: || |
It seems to me that people forget that the jeep stuff was at one point its own entity under American Motors. I don't know if it'd hurt Jeep itself to spun off to its own company again.
Post Number: 1218
|Posted on Tuesday, April 10, 2007 - 11:59 pm: || |
Smogboy--The first Jeep was the winning design to a government request for bid by the American Bantam company, a firm that made small cars as far back as the 1920's and '30 (imagine a car that looks like a model A ford but is the size of a small car today--like a Corolla) this was just before WWII. Things got serious in Europe and the War dept. yanked the contract away from American Bantam because they couldn't make them fast enough in their little plant. The Willys-Overland company (pronounced "Willis") of Toledo got the contract and began mass manufacturing Jeeps for WWII. The war required more Jeeps than W-O could build, so Ford built 200,000 Jeeps at the rouge plant for the war effort. They modified the original grille design from a grating that was manufactured like jail cell bars to the stamped vertical oblong hole look we identify as Jeep.
W-O continued the Jeep line after the war, added full-size pick up trucks, the first all-steel bodied station wagon and forward cab models, and the Jeepster phaeton for two years. W-O sold out to Kaiser industries in '54, just about the time their own passenger car line was dying. They owned and operated Jeep until 1969, when AMC bought the line/plant/name. AMC kept Jeep until they were purchased by Chrysler in 1987. They basically bought AMC for the Jeep brand.
So what were you saying about "Jeep being on their own?"
Post Number: 4973
|Posted on Wednesday, April 11, 2007 - 2:43 am: || |
Thanks for the history lesson 56packman, but my point is that Jeep has always been distinctive and unique- regardless of who has owned it whether it was WO, AMC or DCX... so I stand by my point that Jeep has always had its identity.
Post Number: 1219
|Posted on Wednesday, April 11, 2007 - 7:17 am: || |
Yes it has, and it "has legs" as they would say. It is the strongest brand (identity)in the DCX line up, and may survive to be owned by yet another company.
Post Number: 255
|Posted on Wednesday, April 11, 2007 - 8:33 am: || |
This guy is a total asshole. He screwed over GM.
Post Number: 36
|Posted on Wednesday, April 11, 2007 - 10:03 am: || |
livernoisyard has to be one of the biggest assholes on any message board i've ever been on, ever.
and i'm sure i'm just feeding his ego by even mentioning this.
actually, detroityes seems to have a relatively large amount of assholes and idiots. it makes it quite hard to actually garner useful information here, amongst all the bullshit and petty arguments.
are there actually any mods here, other than lowell?
-recent ex-atlantan, resident of midtown and cracker. how's that for bucking trends...