Bidding for Chrysler, Jeep and Dodge approaches its second stage
29 March 2007

Ownership of the Chrysler, Jeep and Dodge car brands is looking less likely to switch to General Motors, and more likely to transfer either to private investors, or to a car parts-maker, after GM pulled its bid for the Chrysler Group at the eleventh hour.General Motors pulled out of the running on Tuesday (March 27), issuing a statement explaining that it didn’t need any extra production capacity in North America. GM’s pull-out leaves two private equity groups and a single car-industry bidder — Canadian car-parts maker Magna – jostling to take control of Chrysler Group.

The bidders

Two private investor bids are understood to have emerged, one from a New York-based equity group called Cerberus, and one from a consortium of two other US investment companies - Blackstone and Centerbridge.Cerberus manages £8.5 billion of investments and recently led a consortium of banks that bought 51 per cent of GM’s finance arm GMAC for the not inconsiderable sum of £7 billion. Cerberus made the critical play of hiring former DaimlerChrysler boss Wolfgang Bernhard to help its bid.Blackstone is even bigger than Cerberus, with £14 billion of investments, including an interest in car-parts maker TRW Automotive. Its partner, Centerbridge, was created by ex-Blackstone staff and has former GM finance director Stephen Girsky as head of its automotive business.The only known car-industry bidder, Magna, is also thought to be tied with a private investor, Ripplewood. Reports from the US suggest that Magna isn’t planning to take complete control of the Chrysler Group, preferring instead a 20 per cent stake worth around £2.3 billion.Industry experts have interpreted Magna's bid as a move to protect a huge slug of its part supply business; one report estimates that 20 per cent of Magna’s trade is with Chrysler. The Canadian company also has a deeper involvement with the Group than typical supplier might have with a car-maker. Recently it set up a new paint shop at the Jeep Wrangler plant, staffed by Magna employees. Such ‘supplier parks’ are common in Europe, but rare in the US.Adding to the association, many of the cars sold in Europe by the Chrysler Group are built at the Magna plant in Austria, which has made 233,000 Jeep and Chrysler models over the past three years.

Deadline looms

With a deadline for the submission of first bids of March 30 looming, any interested parties must now be in the final stages of registering their bids. Over the last few months, companies as far flung as Hyundai in Korea and Chery in China have been reported to be considering buying some or all of the Chrysler Group; for them, and any other firms who might have considered a bid, it's now a case of put-up or shut-up.We approached Chrysler in the US for a comment on the situation, but were told that, while negotiations concerning its future ownership are on-going, it officially refuses to comment on potential bids. More detail is expected to be revealed on April 4, at DaimlerChrysler’s annual shareholders meeting in Germany.

Julian Rendell

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