DaimlerChrysler, Hold the Chrysler

April 4, 2007 — -- DaimlerChrysler Chairman Dieter Zetsche (you might remember him from the "Dr. Z" ad campaign that aired last year) confirmed today at the company's annual meeting in Germany that Chrysler could be sold.

While a deal could be announced any time, analysts and industry watchers believe that talks are still under way with potential buyers, and that it could be weeks or months before any agreement is finalized.

One reason is that any buyer for all or parts of Chrysler would have to negotiate with the United Auto Workers union, which has recently made it clear that its members have made enough sacrifices.

Chrysler, which appeared to have turned a corner and was doing better than its domestic competitors, stumbled in 2006. It lost $1.5 billion for the year, leading the company to announce this past February that it would close a plant and cut 13,000 jobs, or 16 percent of its work force.

The actual date of the announcement was an unfortunate choice -- Feb. 14. It quickly garnered the title the "Valentine's Day Massacre" from employees and the media.

Then, two days later, news reports surfaced in the United States that the German-based Daimler was in talks with General Motors about a possible sale of Chrysler.

Daimler purchased Chrysler in 1998 for $36 billion. Today, most reports suggest the top value of the struggling U.S. automaker is less than $1 billion to nearly $14 billion.

This broad price range reflects Chrysler's $17 billion to $19 billion health care liability for union employees, retirees and their dependents, who pay little to no deductibles for coverage.

Deal or No Deal?

The major contenders for all or part of Chrysler include Cerberus Capital Management, a private equity firm that recently hired former Chrysler COO Wolfgang Bernhard. Cerberus has been exploring further investments in the auto industry, and recently bought 51 percent of GM's financing unit, GMAC.

Blackstone Group, one of the biggest private equity firms, may also be interested. At the end of March, the firm announced an initial public offering, making shares available to the general public. In recent public filings, the company said it controls more than $78 billion in assets.