Hyundai revs up in race for Chrysler deal

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Hyundai revs up in race for Chrysler deal





Hyundai revs up in race for Chrysler deal
Louise Armitstead and Dominic O’Connell


THE Korean industrial giant Hyundai is leading a pack of international suitors for Chrysler, the troubled US arm of automotive manufacturer Daimler Chrysler.

A takeover of Chrysler by Hyundai, which makes cars under its own brand as well as controlling the Kia marque, would be a watershed for American business.

Alongside Ford and General Motors (GM), Chrysler is one of Detroit’s big-three manufacturers. Together they have fought a fierce and largely losing battle for three decades against low-cost competition from Asian rivals including, latterly, Hyundai.

GM, still the world’s biggest car company, is also interested in buying Chrysler, a move that would speed a much-needed reduction of output by North American carmakers. GM was reported last week to have held exploratory talks with Daimler Chrysler executives.

Chrysler could be worth about £7 billion, although the purchase price would have to take into account the company’s pension deficit and mounting health-care costs, as well as the expense of closing factories.

Hyundai and other foreign bidders are said to be eager to secure access to Chrysler’s valuable dealer network. A senior banking source said that while Hyundai and GM were regarded as being in the lead, there were several potential buyers, including Chinese groups and private-equity firms.

Chrysler has been put in play by Daimler Chrysler, its German parent company. Last week, Daimler Chrysler chairman Dieter Zetsche said investment bank JP Morgan had been hired to review its future, saying “all options” were being considered.

Confirmation that Chrysler was up for grabs came alongside a tough cost-cutting programme, the third turnround plan introduced since Daimler, the German automotive group that owns Mercedes-Benz, bought the American company in 1998.

Zetsche, who was sent from Germany to run Chrysler before taking the chairmanship, said 13,000 jobs would go, along with up to 15% of dealerships and as many as one-fifth of models.

Chrysler is likely to report another big loss this year, including a restructuring charge of up to €1 billion (£675m).

Daimler’s purchase of Chrysler was one of the most ambitious transatlantic business deals ever. Jurgen Schremp, then Daimler’s chief executive, believed the takeover — which was presented as a merger of equals although Daimler held the majority stake — would transform his company into the world’s premium automotive group.

But despite the occasional good year, Daimler has struggled to turn Chrysler round. Like the other members of the Detroit big three, it has been hampered by ageing factories, an unattractive product lineup, and rising pension and health-care costs.

Hyundai already has a link with Chrysler through the World Engine Programme, a three-way manufacturing alliance that joins the two groups with Japan’s Mitsubishi. The companies combined to develop a new range of four-cylinder engines.

Car-industry sources say the other possible bidders for Chrysler would be China’s Chery and SAIC, two automotive companies with global ambitions.

SAIC has expanded rapidly in recent years, and two years ago made an abortive attempt to buy MG Rover. SAIC withdrew, but not before securing the rights to Rover designs. MG Rover later collapsed into administration.
Chery recently struck a collaboration deal with Chrysler under which it would make small cars to be sold in America through the Chrysler dealer network.