Chrysler Rumored to Be In Talks to Sell Jeep to Renault-Nissan

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January 14, 2009

The Reuters news service reported today Cerberus/Chrysler is in talks with Renault-Nissan and the supplier Magna to sell its Jeep brand's assets:

Chrysler is in talks to sell key assets to Renault-Nissan and auto supplier Magna according to people with knowledge of the discussions, though the French automaker on Wednesday denied such talks were under way.

Chrysler is under pressure to restructure after taking $4 billion in U.S. government loans.

Renault and Japan's Nissan, in which the French firm owns a stake, had some contact with Chrysler about a sale of all or parts of the U.S. automaker before the U.S. government stepped in to bail out Chrysler and General Motors Corp in December.

Talks gathered momentum in recent weeks and have included discussions about a deal to sell Chrysler's iconic Jeep brand, according to three people with knowledge of the talks.

Renault, headed by Carlos Ghosn, has been looking to clarify whether a deal to acquire assets from Chrysler would jeopardize the company's access to U.S. government funding, one of those familiar with the talks said.


In a follow up story by the Detroit News, Chrysler may also be in talks with Chinese automakers Chery Automobile and Guangzhou Automobile Industry Group Co. to sell them the PT Cruiser brand.

To add credibility to the story is that Wolfgang Bernhard just surfaced as an advisor to Magna according to Automotive News.

A brief summary of Bernhards' resume from the same story:

Bernhard was Chrysler's chief operating officer under CEO Dieter Zetsche from 2000 to 2004, when he was named head of DaimlerChrysler's Mercedes-Benz Car Group. The appointment was rescinded after Bernhard clashed over strategy with then-CEO Juergen Schrempp.

Later that year, he was appointed chief of Volkswagen AG's VW brand group, assuming the position in 2005. He was ousted in January 2007 in a boardroom shakeup engineered by VW Chairman Ferdinand Piech.

Bernhard then re-emerged at Cerberus Capital Management before the private-equity firm completed its purchase of Chrysler LLC from DaimlerChrysler.

Press reports at the time said he would be tapped to lead Chrysler. Instead, Cerberus picked Bob Nardelli as CEO. He left Cerberus later in 2007.


Also Magna was interested in purchasing the Chrysler Group from Daimler prior to being outbid by Cerberus in the spring of 2007.

There have been also been on again-off again talk with regard to a possible GM-Chrysler merger. It is my understanding that when the news broke last fall that GM was interested in merging with Chrysler, there was also a key third-party player that was not mentioned in the press. That was Renault-Nissan (RN).

Without knowing the specifics of how this would play out, I was told that RN was interested in select Chrysler assets, specifically the Jeep brand and the Dodge Ram pickup truck. GM also did not want the whole company but just select assets as well which included the company’s rear wheel drive fullsize vehicles (Chrysler 300, Dodge Charger and Challenger) and the minivan lineup. It appeared that GM and RN would breakup Chrysler. However, it was never made clear to me what would happened to the rest of the Chrysler lineup, plants and dealer network if such a deal were to happen.

The news about Chrysler selling the tooling to the Chrysler PT Cruiser is also likely legitimate. For starters, the vehicle design is almost eight years old and because of new government regulations would require a significant investment to keep it legal. I have also been told that a deal to sell the Dodge Viper brand is near. In the near future I would not be surprised to hear that Chrysler is also planning to sell other vehicle lines to manufacturers in developing markets.

That should pave the way for a politically correct GM takeover of what is left of Chysler. I do not expect the Chrysler brand to survive in a GM merger. The minivans and LX rear drive cars will probably get integrated into its existing brands. Jeep and Dodge truck may continue to be sold through the current franchises as it is likely easier for RN to crack the US pickup truck with a Dodge branded vehicle.  Furthermore I envision any deal to be very complicated given the multiple companies involved. Daimler's 20 percent ownership stale in Chrysler has yet to be resolved. 

Magna's involvement in the talks comes as a surprise. However, based upon prior interest in the company and expertise as a contract manufacturer in Europe, I beleive they might take over the Jeep and Dodge truck assembly plants.  Also of interest is Chrysler continues to fund development in the next generation Jeep Grand Cherokee and that will help make a deal to sell the brand more appealing to suitors.

In any case, it does appear, the liquidation of Chrysler may be at hand and I will wait to see how it all plays out.

Update:

Of course Chrysler has their own take on their situation!  However it must be remembered Chrysler is not Cerberus.

 

Chrysler Statement Regarding Asset Negotiations
 
Auburn Hills, Mich., Jan 14, 2009  - 

Chrysler LLC Vice Chairman and President Tom LaSorda today denied reports and rumors that the Company is in discussions to sell its brands or plants.

LaSorda addressed several specific inaccuracies and errors in the report:

1. Chrysler is not in discussions to sell the Jeep brand. We have said many times that the Jeep brand is not for sale. Nor are any of our other brands. We will not separate our brands from the Company.

2. While we have said we are seeking to sell non-earning assets, we do not have any buyers for vehicle tooling and are not in discussions with any Chinese, Japanese or Korean companies regarding assets or tooling. While it would be difficult, we would consider licensing an existing platform.

3. We are not in discussions to sell our Belvidere Assembly Plant. We have talked to Magna about partnering with Russian carmaker GAZ to build cars in Russia, but those talks are on hold due to the U.S. and Russian economic downturn.

4. We are not in discussions with Renault. We are not in discussions with Nissan beyond the already announced vehicle programs.

 

 

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