Chrysler Explores Future Options

16 February 2007

DETROIT: The beleaguered Chrysler Group is reported to be in 'alliance' talks with equally troubled rival General Motors in a bid to share development costs for future models. Meantime, Chysler's German parent, DaimlerChrysler, is also said to be "considering all options" for its US offspring - code for a possible sell-off.

Discussions between the automakers are hush-hush and neither party is willing to comment on any joint R&D plans.

After losing $1.5 billion (€1.14bn; £766m) in 2006, Chrysler announced Wednesday it will axe 13,000 North American jobs and trim dealer numbers along with slow-selling models such as SUVs and large pick-up trucks.

DaimlerChrysler ceo Dieter Zetsche was also zip-lipped on speculation that GM might go further than a simple alliance and pursue an acquisition.

The German automaker confirmed, however, that it has appointed investment bank JP Morgan to advise on strategic alternatives for its US subsidiary's future.

A disposal would not be undertaken lightly. Zetsche was named to the top job at DaimlerChrysler partly on the back of his miraculous revamp of the US business, which was acquired by Daimler-Benz in 1998. He trimmed more than 40,000 jobs and restored profit at the unit after a disastrous collapse in 2000. He has also publicly stated more than once that Chrysler is not up for sale.

Zetsche says DaimlerChrysler's senior executives share responsibility for the US business's current difficulties: "We are in this together. This is not about finger-pointing."

He adds the review will not affect existing co-operation between the Detroit group and sibling luxury marque Mercedes, whose management is nervous of any strengthening of links between the two brands.

Data sourced from Wall Street Journal Online and Financial Times Online; additional content by WARC staff