Two Private Equity Firms Interested On Chrysler

February 14 was a sad day for Chrysler employees in the country. On that day, DaimlerChrysler Chief Executive Officer Dieter Zetsche announced that due to the poor performance of the U.S. brand, all options are open for the brand including its sale. The day also saw the workforce reduction carried out by the company as a part of its restructuring plan.

The speculations that Chrysler will be for sale is made even more plausible with the emergence of interested firms popping out and saying that they are interested in buying the U.S. arm of DaimlerChrysler AG. It can be remembered that Chrysler has already planed to cut down the number of their employees in the following months.

Aside from workforce reduction, the restructuring plan of Chrysler involves closing down of a plant and eliminating shifts on two plants. These steps, as Chrysler maintained, are necessary to address the reduced demand for their vehicles.

Recently, The Associated Press reported that there are now two firms which are most likely going to be the next owner of Chrysler. The Cerberus Capital Management LLC and a group of investors led by the Blackstone Group and Centerbridge Partners LP. These firms have expressed their intention to buy the troubled company. The American news agency reported that representatives of the group have made a visit at Chrysler’s headquarters in Auburn Hills, Michigan.

The Associated Press also spoke with a Chrysler insider who disclosed that potential bidders are now looking into Chrysler’s financial status.

Another firm that has shown interest in Chrysler is Canadian car parts manufacturer Magna International along with the largest car manufacture in the world, General Motors. Although the Canadian firm has shown interest, insiders said that the possibility of the Canadian firm buying the company has been reduced. There are also other firms that have shown interest on Chrysler although these are not as strong as the interest shown by Cerberus and Blackstone are Apollo Management LP, and the Carlyle Group. These firms have not yet made comments about their interest on the car maker.

As far as the rumored takeover of General Motors of the ailing Chrysler group, experts pointed out that it looks unlikely. While General Motors has yet to comment about the rumored interest they might have on the third U.S. car maker, speculations in the auto industry says that the world’s largest car manufacturer will not gain any advantage from the acquisition of the ailing group. On the other hand, another U.S. brand, Ford, when asked whether there is a possibility of them buying Chrysler, Ford CEO Alan Mulally flatly said that it will never happen.

On a sudden twist, DaimlerChrysler AG Chief Executive Officer Dieter Zetsche has announced that there is a possibility that Chrysler will still remain as a part of the German company. But the emergence of the two firms most interested in the purchase of Chrysler has a look similar to Nissan cornering lights which shows which way Chrysler is going in the future.

By Ryan Thomas.

"Detroit Disease" Inflicts Chrysler

Chrysler was once admired for its toughness even at a point where the atmosphere is attracting slumping sales and massive losses. Nonetheless, according to some analysts, it seems that Chrysler has lost its protective cloak and eventually been inflicted with the so-called 'Detroit disease'.

Automotive reports are showing that Chrysler will lose $1.5 billion in the third quarter, about more than twice what it had expected beforehand. This loss is brought about by the slow sales of gas-guzzling trucks and SUVs.

According to Tom Appel, editor of Consumer Guide Automotive, "The company has been hit especially hard by the public’s growing desire for smaller, fuel-efficient cars. But the issue may be more one of a perception than a reality."

“I think Chrysler’s being hurt by a general impression that its large and hitherto well-received cars like the Chrysler 300 and the Charger are not very fuel-efficient, and so there’s a bit of a backlash,” Appel added.

Chrysler President and CEO Tom LaSorda said that the company intends to become more competitive internationally with a portfolio of smaller cars. “We’re addressing those issues and moving our product portfolio to a mix that’s more in line with the recent realities and market trends,” LaSorda elaborated.

"But while new products are important, Chrysler, like Ford and GM, needs to do a better job of managing its car and truck inventories with flexible manufacturing processes like those used by Asian manufacturers," said Kevin Reale, research director for AMR Research.

Analysts are also saying that Chrysler lineup has other problems. One problem is its limited offer in the midsize SUV market. On one hand, the sales of Dodge Durango have dropped off abruptly. To circumvent the decline in sales, the automaker is modifying the Chrysler auto parts to set forth a striking lineup.

New Chrysler products that will be launched this year include Sebring sedan, Jeep Compass, Jeep Patriot and compact Dodge Caliber. “Dodge is about to launch the mid-size Nitro SUV, so that will help them in the fuel economy perception area, but when it comes to minivans someone has to come up with something new,” Appel added. “The expectation is that the new Dodge Caravan and Chrysler Town & Country minivans will be that new thing, but their release is still some time away — they’re not supposed to come out until mid-2008.”

By Sarah McBride.