BERLIN – DaimlerChrysler AG’s decision to pull out of a YEN 700 billion (EUR 5.4 billion) rescue plan for Mitsubishi Motors (MMC) throws into doubt the German car giant’s global strategy and the future of the ailing Japanese carmaker.

It had been expected that Mitsubishi and DaimlerChrysler, the Japanese car group’s biggest single shareholder with a 37 per cent stake, would contribute to the YEN 700 billion bail out in a bid to restore Mitsubishi’s fortunes in exchange for new shares of stock and ultimately turning the Japanese automaker into a subsidiary.

As part of the rescue plan, which was due to be unveiled on 30 April, a leading DaimlerChrysler executive, Andreas Renschler, had been tipped to become Mitsubishi’s new chief.

But already under pressure as a result of the massive losses run out by its troubled U.S. Chrysler arm, the transatlantic carmaker now says that it would not inject any more money into MMC and would cease further financial support for the Japanese automaker.

In a statement, DaimlerChrysler went to say that talks had failed to reach a solution to an earnings collapse at Mitsubishi.

The news that DaimlerChrysler, the world’s fifth biggest carmaker, was opting out of the Mitsubishi bailout also coincided with press reports Stuttgart-based group was considering dumping its 10.5 percent stake in South Korean-based Hyundai Motor Co Ltd.

This would represent a major reversal of DaimlerChrysler’s global strategy, which only two week ago was defended at the group’s annual general meeting by chairman Juergen Schrempp, whose set the vision of the carmaker becoming a world company built on pillars in the United States, Asia and Europe.

With DaimlerChrysler’s market capitalisation having slumped since its paid USD 37 billion (EUR 31 billion) for Chrysler in 1998 and the group having failed to deliver a promised jump in earnings, Schrempp has faced growing anger from his company’s shareholders.

As a consequence, the move to withdraw from MMC, which is Japan’s fourth largest carmaker, is also likely to result in a renewed debate about the future of Chrysler.

“The news is good,” said one analyst about the Mitsubishi decision. “Now we have to wait for further details.

“It reminds me of BMW’s pullout from Rover. One has to hope that Daimler also won’t have to swallow some of Mitsubishi’s debts,” the analyst who requested anonymity added, while also believing that the MMC move would also lead to speculation about a split with Chrysler.

Investors marked the DaimlerChrysler decision by driving up shares in both the company and its key shareholder, Germany’s biggest bank. Deutsche Bank AG.

But while shares in DaimlerChrysler and Deutsche raced ahead by about eight per cent and two per cent, respectively, during pre-lunch trading in Frankfurt, Mitsubishi shares plunged by about 25 percent in Tokyo.

Sources inside the German-American automotive giant told Deutsche Presse-Agentur dpa that the company plans to completely end its involvement with Mitsubishi.

DaimlerChrysler apparently decided that its current financial assistance plans for the struggling Japanese automaker were insufficient and that it had become a question of good money chasing bad.

Three years ago DaimlerChrysler paid USD two billion (1.7 billion euros) for the 37 percent MMC holding, which it said at the time would represent a key pillar of its global strategy, which included building a presence in Asia.

But while DaimlerChrysler retains a strong presence in China, Mitsubishi’s rivals, Nissan and Toyota, have been making big inroads into the United States, Europe and in particular the Stuttgart-based company’s domestic market in Germany.

Analysts said that if DaimlerChrysler decides to abandon Mitsubishi it raises the question as to whether the German group will be able to find a buyer for its stake or whether its Japanese partner will be sold off in sections.

Earnings for Mitsubishi Motors have slumped as a result of sagging sales and defaults on auto loans at its North American operations, as well as declining sales in the domestic market.

In February, the company revised upward its forecast of pre-tax losses to YEN 115 billion in the fiscal year ending 31 March from an earlier estimate of YEN 62 billion yen.

DPA

Subject: German news