Selling Chrysler is drafty business if you're naked

Edward Lapham is the executive editor of Automotive News. He writes commentaries for Automotive News online every business day. His commentaries also can be found here.

EDWARD LAPHAM COMMENTARY 3/13/2007

Edward Lapham | Automotive News / March 13, 2007 - 11:03 am

If the hand-wringing in Stuttgart about whether to fix or sell the operations in Auburn Hills is like every other twist and turn in Chrysler's history, the coulda-woulda-shoulda stuff will be sorted out ad nauseam.

It's still too soon to start pointing fingers.

That was hammered home last week as industry execs, wags, consultants, analysts, media and other informed persons milled around at the auto show in Geneva.

Europeans were convinced that the Chrysler is already gone. Some North Americans held out hope that the group might remain part of the DaimlerChrysler empire.

The CEO of one European coachbuilder told me that Magna International would claim the prize because of its status and experience as a tried-and-true supplier/partner. This theory works best if you assume an influx of supporting capital from Russia or elsewhere.

Lots of talk

There also was serious talk of Chinese and Indian money nosing around Chrysler. And speculation about private equity funds was everywhere.

By the way, some of the Chrysler-needs-to-go talk came from folks who told me two years ago that the only way General Motors could get out of its troubles in North America was to dive into Chapter 11 so it could dump its long-standing contractual obligations to its employees.

Meanwhile, a friend who works for Chrysler in Auburn Hills told me his colleagues believe that Dieter Zetsche is conducting a good-faith, due-diligence look at all the options so he can stand up at the DaimlerChrysler annual meeting April 4 in Berlinand tell shareholders that keeping Chrysler in the family is the right thing to do.

Their hopes were bolstered when Zetsche was quoted in U.S. newspapers last week as saying Chrysler wouldn't be auctioned. To the untrained ear it sounded as if he were saying the group wouldn't be sold.

But as I was reminded by another friend in the investment banking world, "auction" is a technical term that describes a specific sale process in which an offering memorandum is widely circulated to all potential buyers in an attempt to start a bidding war and drive up the price.

Conceal the freckles

It makes sense that Zetsche would want to avoid creating a prospectus that would require disclosing every wart and freckle on the company's financials and its business plan. That would leave DaimlerChrysler standing buck naked in front of its competitors and the whole world.

A standard confidentiality agreement would be more useless than a fig leaf in the face of such a widespread, detailed disclosure.

Interestingly, since Zetsche made those comments in Geneva, more private equity funds have lined up to kick the tires and pop the hood.