Blackstone team due at Chrysler

(PAUL SANCYA/Associated Press)

Chrysler Group Chief Executive Tom LaSorda will meet today with Blackstone representatives.

March 7, 2007

BY TIM HIGGINS

FREE PRESS BUSINESS WRITER

Blackstone Group, a high-profile buyout firm, is expected at Chrysler Group headquarters in Auburn Hills today to meet with CEO Tom LaSorda and his executive team.

Representatives from the private equity firm will meet for hours with the Chrysler Group as they hear about every aspect of the struggling U.S. automaker.

The group will get the same presentation Cerberus Capital Management got Monday. That private equity firm received a briefing at Chrysler Financial on Tuesday, a person familiar with the activities said. Cerberus owns 51% of GMAC, the financial unit affiliated with General Motors Corp.

Blackstone is expected to be at Chrysler Financial in Farmington Hills on Thursday.

DaimlerChrysler AG Chairman Dieter Zetsche said Monday that Chrysler Financial, which accounts for about half of the profit generated by DaimlerChrysler's Financial Services, could also be sold if there's a decision to sell or spin off the Chrysler Group.

The meetings with LaSorda and his top executives last for several hours and include a 200-slide presentation that covers the company's finances and operations.

Both Blackstone and Cerberus are leading private equity firms. Blackstone's CEO Stephen Schwarzman is on the cover of Fortune magazine with the headline: "The new king of Wall Street." Cerberus, in addition to its stake in GMAC, holds a share of GDX Automotive Inc. of Farmington Hills and is the lead investor in a bid to acquire as much as 70% of Delphi Corp.

Spokespeople for Blackstone and Cerberus declined to comment Tuesday.

Similar meetings with other potential buyers could occur next week.

Speculation has swirled about potential suitors since Zetsche refused to rule out selling Chrysler last month. In addition to the equity groups, names including GM and Magna International Inc. have popped up as suitors, but so far no one is talking about specifics.

In Switzerland on Tuesday, Zetsche confirmed that DaimlerChrysler has been involved in talks with GM about building some products with Chrysler. He told reporters that GM raised the idea.

"This has shown potential, but those talks have not come to a conclusion but have certain promise," he told Reuters.

GM CEO Rick Wagoner remained tight-lipped on the issue while at the Geneva auto show. "I really don't want to get into it," the Associated Press quoted him as saying. "It's a slippery slope."

Gerald Meyers, University of Michigan business professor and former chairman of American Motors Corp., said it is not surprising that a private equity firm would be interested in buying Chrysler, noting that these kinds of firms typically take on companies with financial problems.

"They think they can do anything. They're masters of the universe," he said. "They'll clean it up and resell it. Everybody will be rich except the people they cut loose."

Van Conway, senior managing director of Conway, MacKenzie & Dunleavy, said a private equity firm could drive the sales price of Chrysler higher than expected.

"If you put the financial performance in the traditional valuation formula, you probably don't come up with a big number. But there is a tremendous amount of money in these funds to do deals. It's an American icon, and it wouldn't surprise me if this thing would bring a number that generally surprises everybody," he said.

Chrysler Group lost $1.5 billion last year. Estimates of a stand-alone price for Chrysler have ranged from $5 billion to more than $13 billion.

Daimler-Benz AG paid $40 billion in acquiring Chrysler Corp. in 1998.

Conway said this week's meetings could be largely about sizing up LaSorda and his leadership team.

"They want to take the temperature of the management team," he said, to determine whether changes are needed.

"They want to look at the whites of their eyes and talk to them about their vision. Because if they do a deal, everything else being equal, they would rather not have sweeping changes at the top level."