Chrysler has been in the news a lot lately, thanks mostly to owner Cerberus Capital Management publicly pronouncing that the automaker is for sale. Just one year after acquiring Chrysler from the company now known as Daimler AG, Cerberus wants to ditch Chrysler.
General Motors is the one Chrysler suitor who has been getting all of the attention lately, but that arrangement may not be made. Cerberus already owns 51% of GMAC, which is GM’s financing arm, and would love to purchase the remainder from GM. In exchange, Cerberus would unload Chrysler to GM who would presumably keep Jeep while cutting the Chrysler and Dodge brands.
The problem with General Motors is that the automaker is struggling financially itself and finding it difficult to arrange the financing to acquire Chrysler. Part of the acquisition costs of taking over Chrysler would be the cost to shut down excess plants while providing lucrative, but costly severance packages to tens of thousands of workers. GM is in no position to buy Chrysler unless the federal government intervenes. Right now, the feds are busy putting out fires caused by the mortgage meltdown, and has been paying scant attention to what is unfolding in Detroit.
The newest wrinkle in the Chrysler sale is that Nissan and Renault are reportedly interested in getting a piece of Chrysler. Right now, French automaker Renault owns 44% of Nissan, while Japanese automaker Nissan owns 15% of Renault. The two automakers have a unique business relationship that has successfully married two dissimilar brands with both companies sharing one CEO, Carlos Ghosn.
The terms of the Nissan-Renault bid have not been completely spelled out, but it would likely involve having Renault buying 20% of Chrysler and having Nissan foot the bill. Renault has several billion dollars of debt to contend with, while Nissan is awash in cash and could provide the funding for Renault.
An arrangement between Nissan, Renault, and Chrysler makes sense for two reasons:
Nissan and Chrysler have several new agreements already in place. These include Nissan building a small car for Chrysler’s Latin American network as well as providing a midsize car for Chrysler through the one of the company’s Tennessee factories. Chrysler has promised to provide the platform for the next generation Titan pick up truck which will likely be updated in 2011.
Renault could use Chrysler as a way to reenter the highly competitive US market. Back during the 1980s, Renault owned American Motors Company – which at that time owned Jeep – but sold the company to Chrysler who kept Jeep while tossing the AMC brand. Renault could supply some models for Chrysler and Dodge or even reintroduce its own branded cars through the Chrysler LLC dealer network. For its part, Renault could gain access to selling Jeep models across Europe.
As for GM, the company may not be left entirely out in the cold should Renault and Nissan get their way. Cerberus has been looking at acquiring the rest of GMAC, something GM could allow in exchange for some much needed cash and perhaps their own stake in Chrysler. Whatever takes place will likely happen fast – Chrysler being on the ropes does nothing to bolster consumer confidence, a surefire way to scare off potential buyers who are already being hammered by the worst financial crisis of this young century.
(Source: The Detroit News)
Matthew C. Keegan is a freelance writer who resides in Cary, North Carolina. Matt provides magazine, web content, and article writing services to clients all over the world serving the automotive, human interest, and business communities. The Auto Writer is his flagship automotive blog.
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