For Chrysler’s sake, just sell it already!

by James Bryant, March 26th, 2007, 7:00 am

I have blogged in this space more than once about DaimlerChrysler possibly selling off its troubled Chrysler Group unit — and to be perfectly honest, I hope this will be the last time.

It seems like a sale is all but inevitable. The vultures are circling. Interested buzzards include a major carmaker (GM — a dark horse candidate, I think), a giant parts supplier (Magna International), and private equity concerns (Cerberus Capital Management, and a team of Blackstone Group and Centerbridge Partners).

It’s interesting to look at the two groups who’d feel the most impact and examine what they think about a possible deal.

Investors: DaimlerChrysler’s investors want Chrysler gone. They don’t seem very particular about who buys it as long as someone does. A small group of investors has gone so far as to suggest that Chrysler is such a drag on operations, reference to Chrysler should be dropped from the corporate name, preferably by March 31^st 2008 or when the company is sold — whichever comes first. These investors want DaimlerChrysler to be called Daimler-Benz AG as soon as possible, as they allege damaging nicknames like Daimler-Crisis and Crime-ler are dragging down the whole operation.

Labor: The depth of labor’s resistance to a deal depends on who the deal is with. Labor would prefer another major carmaker to take over Chrysler, largely because unions are adept at putting the squeeze on major carmakers. Labor is against a private equity-led deal as it is wholly unfamiliar with exacting concessions from private equity.

Assuming it’s not uncommon for labor to take one in the teeth to the eventual benefit of investors, here is what will happen to Chrysler:

Chrysler will be sold to a consortium consisting of private equity and a manufacturing concern of some kind. The manufacturing company will manage Chrysler and take a minority stake. Daimler will also retain a minority stake. Labor will be semi-satisfied with this compromise until former DaimlerChrysler and Volkswagen wunderkind/hatchetman Wolfgang Bernhard shows up to replace Tom LaSorda as Chrysler CEO. Bernhard will make tough decisions. Workers will be outraged. The private equity concern(s) will be delighted.

As for me? I will use my new-found powers of divination to drive the Bellagio Casino in Las Vegas into bankruptcy.