Reuters says that the German media Handelsblatt and Frankfurter Allgemeine Zeitung are reporting that DaimlerChrysler (DCX) is seriously considering spinning off its troubled Chrysler unit. The report goes so far as to say that a US investment bank has been contacted.
Over at The Wall Street Journal, the report is that the restructuring of Chrysler has the green light from the parent’s management. According to the paper, the car company will cut 10,000 jobs and turn away from being dependent on SUVs and pick-ups for most of its profits. Chrysler’s goal now appears to be profit and not growth.
Part of the restructuring plan will also be to share engineering and parts sourcing with Daimler’s other car unit, Mercedes.
While both news reports could be true, it would seem that spinning-off Chrysler at this point would not help the DCX shares much. At $64.25, the company’s stock is at a five year high. Over the last two years, DCX shares are up over 40% against Toyota’s (TM) 60% increase, GM (GM) shares which are flat and Ford’s (F) shares which are off almost 40%. As a matter of fact, DCX shares have done almost as well as Honda’s (HMC) over the last 24 months.
If getting rid of Chrysler is part of Daimler’s plan, it is difficult to see a guaranteed benefit to shareholders. A successful restructuring of the US unit is just as likely to send the parent’s shares North. Not to mention that unraveling the corporate and operational structures would seem an almost impossible task.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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