Goldman sets Chrysler value at $6 billion

Assessment higher than suitors claim

March 20, 2007

BY TIM HIGGINS | FREE PRESS BUSINESS WRITER

Chrysler Group could be worth about $6 billion in a sale to a private equity firm, according to a leading global brokerage.

That's $1 billion more than the value purportedly ascribed to Chrysler by two firms thought to be leading suitors for the company, and $2 billion more than a Canadian parts maker supposedly believes Chrysler is worth.

Goldman Sachs Group Inc., whose London office valued Chrysler at $6 billion, also said the Chrysler Group is pulling down owner DaimlerChrysler AG's value by $4 billion. "DCX's share price implies a negative value for Chrysler," Goldman analysts said in a note issued to clients.

Chrysler as a spun-off company -- without pension and health care liabilities -- could have a value between nearly $8 billion and $14.6 billion.

But Goldman Sachs said a new initial public offering is unlikely. "Apart from potential funding requirements to satisfy" Security and Exchange Commission "listing rules, we believe the time frame would be too prolonged for DCX management to consider this option seriously," the analysts wrote.

Speculation ignited about a month ago when DaimlerChrysler Chairman Dieter Zetsche said all options are on the table for Chrysler and wouldn't exclude selling the Auburn Hills-based unit.

Big-name private equity firms, such as Blackstone Group and Cerberus Capital Management, have visited Chrysler headquarters to review the company's finances and future plans.

Last week, KeyBanc Capital Markets analyst Brett Hoselton said the private equity firms place the company's worth at $5 billion and that Canadian parts maker Magna International Inc. believes the value is more like $4 billion. Magna might be interested in a partnership with a private equity firm, Hoselton said.

There has also been speculation that General Motors Corp. is interested in Chrysler.

"While potentially having access to operational synergies, we do not think that a trade buyer such as another automotive group would be willing to pay up for the financial services business of Chrysler," Goldman said. "Another automotive manufacturer would most likely have access to its own financing arm."

The analysts estimate that such a deal would need to result in a savings of $1.5 billion in synergies or a 3.4% margin on a sustainable basis for a deal to work.

Goldman upgraded DaimlerChrysler from "sell" to "neutral."

In other news regarding the Chrysler Group, a member of DaimlerChrysler's supervisory board told the Wall Street Journal that he wants to find away to keep Chrysler part of the company. "We wouldn't support a sale to a private equity investor," Gerd Rheude, a labor representative, told the newspaper. "It's important for us that Chrysler won't be cut in pieces, but that we find a way of securing the jobs of our American colleagues."