Chief Says Chrysler Unit May Be Sold

By DOW JONES

Published: March 6, 2007

The financing arm of the Chrysler Group, the American division of DaimlerChrysler, could be sold as its parent company considers options, DaimlerChrysler’s chief executive said yesterday.

On Feb. 14, DaimlerChrysler said it was keeping all options open regarding the future of the Chrysler Group, leading to speculation about the prospects of a sale or a spinoff.

Speaking during the Merrill Lynch Global Automotive Conference in Geneva, the chief executive of DaimlerChrysler, Dieter Zetsche, said the same held true for the financing arm.

General Motors last year sold a majority stake in its financing arm, the General Motors Acceptance Corporation, to a group led by the private equity firm Cerberus Capital Management.

Private equity firms like the Blackstone Group, competitors like G.M. and the auto parts supplier Magna International have reportedly expressed interest in Chrysler.

The Chrysler Group posted a $1.5 billion loss in 2006 after turning a profit in 2005.

Its financial results were hurt as consumers bought fewer pickup trucks and S.U.V.’s as fuel prices increased and the housing market slumped.

The automaker also did not react fast enough to cut production, and unsold inventory piled up on dealer lots.

As the speculation increases over a sale, Chrysler is starting a revamping plan aimed at restoring profitability by 2008.

The plan calls for eliminating 11,000 hourly positions and 2,000 white-collar jobs, or about 16 percent of its work force.

Plans also call for closing a sport utility vehicle assembly plant in Newark, Del., and a parts distribution center in Cleveland. Other options include cutting shifts at three assembly plants.

Mr. Zetsche said on Monday that the company was “very much aware” of the reaction the Feb. 14 announcement would have on employees, capital markets, and dealers, but said he was “not in a position” to give a timeline for a decision on Chrysler.

Meanwhile, Ford Motor Company, which is also trying to stage a turnaround amid billions of dollars in losses in recent months, said yesterday that it would reveal at the Geneva Motor Show later this week its plans to develop a subcompact car for American consumers, based on the concept it has developed with Mazda.

Lewis Booth, president of Ford of Europe, said that the company planned to develop the car for its struggling North American unit.

He added that the European unit of Ford would develop a similar model for sale in Europe and Asia.

Ford is also taking a new version of its Mondeo, a large family car, to Geneva.

The Mondeo is important to Ford as the company seeks to gain ground in the sedan market. The car will be configured in four-door, five-door hatchback and station wagon styles.

As concerns rise about global warming and the environment, the Geneva show, which will run from Thursday through March 18, is expected to focus on reducing emissions and making engines more fuel-efficient, while helping to maintain profit for automakers.