DaimlerChrysler sells its stake in Mitsubishi

11th November 2005, Comments 0 comments

11 November 2005, STUTTGART, GERMANY - Ending a strained auto industry marriage, DaimlerChrysler has sold its shares in Mitsubishi Motors Corp. (MMC) to U.S.-based investment group Goldman Sachs, DaimlerChrysler and Mitsubishi announced on Friday.

11 November 2005

STUTTGART, GERMANY - Ending a strained auto industry marriage, DaimlerChrysler has sold its shares in Mitsubishi Motors Corp. (MMC) to U.S.-based investment group Goldman Sachs, DaimlerChrysler and Mitsubishi announced on Friday.

How much DaimlerChrysler lost in the tie-up, which began in October 2000, was not disclosed. The German-American auto company originally acquired 34 per cent of Mitsubishi at a price that industry sources guessed at 2.5 billion euros.

The stake shrank after DaimlerChrysler refused to contribute to a rescue plan at MMC. The sources said cash proceeds from Friday's final sell-out would most likely boost the Stuttgart-based company's balance sheet by about 500 million euros.

DaimlerChrysler also gained significant savings on its research budget during the five years, as the two companies developed joint "platforms" to manufacture similar cars, so the "loss will not be all that huge", one financial analyst in Germany commented.

European financial markets welcomed the move. DaimlerChrysler stock rose 1.7 per cent, slightly ahead of the DAX 30 gain of 1.2 per cent. It was trading at 42.67 euros just after midday.

The German automaker, which was the fourth-largest shareholder in Mitsubishi, sold all of its 12.42-per-cent stake in the Japanese carmaker. Goldman Sachs thereby increased its stake in Mitsubishi to 13.45 per cent and became Mitsubishi's top shareholder.

Although the capital ties between the two automakers will dissolve, individual alliance projects will still be kept, said Mitsubishi, which is Japan's fifth-largest car maker.

Those projects include joint development and production of engines, the shared use of automobile architecture, as well as the joint production of passenger cars.

After the announcement, Rudiger Grube, who was DaimlerChrysler's non-executive board member at MMC, resigned.

DaimlerChrysler explained that it had chosen the present time to pull out because restructuring at MMC had made a good start and the automaker was able to obtain a better price for the MMC shares.

The marriage hit the rocks on April 2004, when DaimlerChrysler chief executive Juergen Schrempp, who retires at the end of this year, sought to inject fresh funds into MMC through a Mitsubishi equity issue, but his board refused its blessing.

Currently, DaimlerChrysler and Mitsubishi are jointly manufacturing Smart ForFour cars at a Dutch Mitsubishi factory in Born. In a 50:50 joint venture, a DaimlerChrysler German plant at Koelleda makes petrol engines for Smart ForTwo and Mitsubishi Colt cars. Smart is DaimlerChrysler's micro-car brand.

MMC recently agreed to supply the engines for the replacement Smart ForTwo model.

DPA

Subject: German news

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