Chrysler: Saving A Great Automaker, or Breakup Deal?

Labor Union Friendly Bids Left Out in Favor of Private Equity Buyouts

As DaimlerChrysler AG Executive and Board Member, Rüdiger Grube, meets with prospective buyers this week at JP Morgan Chase offices in New York, it appears that two more union-friendly proposals have been left out of those meetings.

Grube is scheduled today to start a week long round of meetings with representatives from the tandem of Blackstone Group and Centerbridge Capital Partners LP; Cerberus Capital Management LP; and a partnership between Canadian auto-parts supplier Magna International Inc. and private-equity firm Ripplewood Holdings Inc.

The other two known bidders for Chrysler, Palm Beach Businessman Daniel Imperato and Kirk Kerkorian, were both not invited to these rounds of meetings. Ironically enough, both the Imperato and the Kerkorian led proposals included making the United Auto Workers an equity partner within the Chrysler Corporation.

The vision that Imperato and Kerkorian share is of building up the Chrysler Corporation. The two parties have stated their long term aspirations for the Chrysler Corporation which is why both have pursued union involvement. The other three bidders have not stated their long term interests in Chrysler.
Many have feared that a private equity group could liquidate the company to realize the reported $38 billion breakup value and destroy thousands of union jobs in the process. Such a move would leave Daimler Benz AG with an exit strategy out of Chrysler and would leave a private equity fund with a substantial profit. A long term bidder would most likely not pay a high premium for Chrysler in order to have the financial ability to help the struggling automaker.

Last Friday, on a Detroit radio station, UAW President Ron Gettelfinger said, "I've had no discussions with anyone from Tracinda, and I don't recall that anyone in our organization has."

Gettelfinger also added that other bidders had already approached the UAW regarding an equity stake. He did not indicate whether any of the three invited bidders for Chrysler submitted any proposals for such an involvement. Imperato was among the potential bidders who have had contact with high ranking UAW officials regarding a Chrysler equity partnership. Imperato was also the first bidder to go public with his desire for a partnership with the UAW and a detailed plan to do so.

Such a partnership has been considered as necessary to help fund Chrysler's reported $18 billion under funded pension program. While both Imperato's and Kerkorian's plans would give blue collar workers the ability to own stock in the company, Kerkorian has called for major union concessions whereas Imperato has asked for little to none.

The exclusion from this round of prospective buyer meetings would be the second time that both the Imperato and the Kerkorian groups have been left out by JP Morgan Chase.
Nine days after DaimlerChrysler Chairman and CEO Dieter Zietche's February 14th announcement of a possible sale of Chrysler, Jerome York, longtime Kerkorian lieutenant and former Chief Financial Officer of the Chrysler Corporation, was on the phone with Lawrence Slaughter, Chairman of JP Morgan Chase, regarding Chrysler. Tracinda, Kerkorian's company, had sent a formal letter to Mr. Slaughter on February 28 to declare their interest. The letter also asked for a due diligence package.

Both Kerkorian and Imperato, who have made several requests for the Chrysler Due Diligence package, were never given the detailed financial and product-development data that JP Morgan Chase prepared for the groups lead by the other three prospective buyers.

Kerkorian has a chronicled history with Chrysler, a company that he once tried to takeover in 1995, and sued in 2000 after the Daimler-Benz AG merger with Chrysler Corporation. He was unsuccessful in his takeover attempt in 1995 and a US judge ruled against his lawsuit in 2005.

On the other hand, Imperato has had less of a history with Chrysler. However, his proposal has not received serious consideration from Chrysler because of a March 2007 Detroit Free Press article that questioned the ability of his group to purchase Chrysler due to the size of one of the companies that Imperato owns. Imperato described the company as a "shell company setup for his kids" and said that his consortium was making the bid and not the "shell company".

Recently, Imperato stated that he would be open to meeting with Kerkorian, and has made contact with his office in order to arrange a formal meeting. In addition, Imperato has written a formal letter to Gettelfinger and has requested a meeting with him as well.

*** This release has been created by i1connect, an independent news agency.***

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