The Future of Daimler AG?

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November 2, 2007

The market has spoken! The value of DaimlerChrysler AG has increased almost 100% since it was announced by Daimler management, "all options were on the table" when it came to Chrysler's future. It was not surprising the stock price would rally after such news, though the strong upward momentum has been very unexpected.

 

Since the initial hype of the merger back in the late 1990s, the stock value of the combined company has languished. Throughout their relatively brief marriage, many of the parent company’s operations were hit with major setbacks. Even Mercedes-Benz, being the most high profile operation within the company, experienced major cost and quality problems in the early 2000’s resulting in significant losses.

With the stock priced depressed and the ongoing restructuring of their global automotive operation as a whole, there were industry rumors of a possible hostile takeover of the company.



Even with the many "real" problems at their Mercedes-Benz Group, many believed the problems at Chrysler Group were the cause. Chrysler had become a perpetual distraction for Daimler management and Mercedes-Benz suffered for it. This relationship need to end.

With the threat a real possibility, DaimlerChrysler management reached the same conclusion.

Now that the recent sale of Chrysler to private equity final, Daimler management can now better focus on Mercedes Benz, SMART and their large heavy-truck division. That at least appears to be the belief of shareholders, judging by the stock price.

Finally, with the value of these core operations unburdened by Chrysler, it seems now, the future is a lot brighter for Daimler AG.

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