DaimlerChrysler drops Mitsubishi
DETROIT DaimlerChrysler said Friday that it had sold its final shares in the Japanese carmaker Mitsubishi Motor, effectively ending Jürgen Schrempp's grand plan to create a global car company.
DaimlerChrysler did not disclose the price of its remaining 12.4 percent stake in Mitsubishi, which it sold to Goldman Sachs. But it said the sale would lift its income by $588 million.
In turn, the move makes Goldman Sachs, with a 13.4 percent stake, the largest shareholder in Mitsubishi. DaimlerChrysler gets free of an automotive albatross that had been an embarrassment and a financial drain ever since it took a one-third stake in Mitsubishi in March 2000.
DaimlerChrysler initially paid $2.1 billion for that stake, in a move that came two years after the announcement of the trans-Atlantic combination of Daimler-Benz of Germany and Chrysler, the American car company.
The deal was the brainchild of Schrempp, who is stepping down at the end of the year as DaimlerChrysler's chief executive, two years before his contract is to expire.
Mitsubishi was actually DaimlerChrysler's second attempt at adding a Japanese company to its automotive stable.
Only months after the merger was finalized, Schrempp was on the verge of a deal with the Japanese automaker Nissan, only to bow to heated objections from DaimlerChrysler directors, who felt that the transaction was happening far too quickly. Nissan ultimately teamed up with the French automaker Renault.
Schrempp waited another year before crafting the arrangement with Mitsubishi, a long-time Chrysler partner.
Before it could even be finalized, however, Mitsubishi said it had hidden defects on its vehicles, a serious sin in quality-focused Japan. DaimlerChrysler ultimately got a $200 million discount on its stake, paying $1.9 billion for a share that eventually reached 37 percent.
But soon it became evident that Mitsubishi needed much more attention. In March 2002, Daimler sent one of its own executives, Rolf Eckrodt, to Japan, replacing Mitsubishi's president, Takashi Sonobe. Mitsubishi also asked for a $1.5 billion cash injection from DaimlerChrysler, faced at the time with financial problems at Chrysler.
The German company said no, began selling some of its Mitsubishi shares, and then announced in 2004 that it would withdraw its financial support from Mitsubishi.
That forced the carmaker to seek help from other members of the Mitsubishi industrial group in Japan, which in turn sought buyers for DaimlerChrysler's remaining stake.
Daimler's sale of its last Mitsubishi shares is the latest in a series of steps taken by the company to rid itself of some of its holdings and concentrate primarily on Chrysler and Mercedes, which is in the midst of its own turn around plan.
Last year, DaimlerChrysler sold a small stake in Hyundai, a Korean auto company, and it is looking for a buyer for MTU, a diesel engine maker in Fredrichshafen, Germany.
The Mitsubishi sale comes as Schrempp's successor, Dieter Zetsche, the former chief executive at Chrysler, has embarked on an aggressive plan to fix Mercedes, which has been hurt by quality problems and heated competition from its German luxury rival Bayerische Motoren Werke.
DCX Sale of shares is meaningless
Quote:
Originally Posted by jusmills
I think that just means that mitsubishi won't have the financial support from Chrysler to cover up glaring missteps now...ie if they royally jack up a design (which I wouldn't put past them) then mitsubishi and mitsubishi alone will take the hit. BTW the mitsubishi industrial group is huge...they have a huge portfolio, including the Bank of Mitsubishi, Mitsubishi Heavy Industries, Mitsubishi Electronics, plus stake in Hyundai Inc...which makes most if not all of their money in heavy industries like shipbuilding...
Its a hit for the mitsubishi group because they won't benefit from information sharing (from Mercedes primarily). I wouldn't be surprised though if the auto-group doesn't find a Chinese investment group/automaker looking for ways to buy into the American market, or if another Japanese company doesn't buy the shares to gain an even bigger market share in the US.
DCX pulled out of Mitsu back in April 2004 when they refused to put more cash into them. Their share dropped to about 18% and kept dwindling as Mitsu issued more shares.
As such, the strategic allaince has now been reduced to specific project partnerships (such as the C segment platform, the Smart/Colt sharing and the Smart engine supply deal).
Mitsubishi Heavy, together with other Mitsubishi group companies, are the majority owners now (just like they used to be back in the 70's). It is very unlikely that the Mitsubishi group will relinquish control to a Chinese firm. Considering the socio-cultural climate, even a lucrative offer from Hyundai would likely be rejected...
IMHO, I think Mitsu is better off without DCX in control. DCX tried to forcebly fit Mitsu inhto their global strategy, without actually considering Mitsu's market position within local markets (the ugly designs were one of the results of this strategic blunder). In addition, Rolf Eckrodt was not particularily culturally sensitive. He relied on former management to run the company, but refused to really listen to them... There is an interesting article on this at Ward's but you have to pay... Anyway, I digress.
Basically, Mitsu isn't going to disappear anytime soon.
