Daimler plotted buyout of Chrysler
01-27-2003, 07:32 AM
#1
AccordPower24
Thread Starter
Join Date: Jun 2002
Location: West Virginia
Posts: 399
Likes: 0
Received 0 Likes
on
0 Posts
Daimler plotted buyout of Chrysler
From Detroit News
Daimler plotted buyout of Chrysler
'Project Blitz,' hatched in 1995, detailed acquisition, not merger, lawsuit reveals
By Sarah A. Webster, and Bill Vlasic / The Detroit News
AUBURN HILLS -- A secret 1995 document detailing a potential acquisition of Chrysler Corp. by Daimler-Benz AG has surfaced in billionaire Kirk Kerkorian's lawsuit challenging the purported "merger of equals" between the two automakers.
Lawyers for Kerkorian and other Chrysler investors have seized on the 80-page plan, dubbed "Project Blitz," as evidence that Daimler plotted to buy Chrysler for years before the companies joined in 1998 to form DaimlerChrysler AG.
Kerkorian alleges Daimler-Benz Chairman Juergen Schrempp cheated him and other shareholders out of an acquisition premium by buying Chrysler under the guise of a merger of equals.
Kerkorian is seeking $13 billion in damages in his lawsuit, which has class-action status in federal court in Delaware. DaimlerChrysler has said the suit, which appears headed for a May trial, has no merit.
But if nothing else, Project Blitz -- a copy of which was obtained by The Detroit News -- shows that Daimler-Benz executives analyzed a potential buyout of Chrysler long before Schrempp negotiated a stock-swap with Chrysler Chairman Robert Eaton in May 1998.
Prepared in the fall of 1995 by Daimler-Benz investment banker Goldman Sachs Group Inc., and revised a year before the DaimlerChrysler deal, Project Blitz dissects Chrysler's finances and products, raises multiple "acquisition issues" and outlines potential obstacles to a buyout.
"It doesn't show they wanted to enter into a merger of equals with Chrysler," said Jay Eisenhofer, co-lead counsel for shareholders in the class action suit. "They wanted to acquire Chrysler."
After the two companies combined in 1998, two American presidents of the Chrysler Group were fired and German executives were installed to run the No. 3 U.S. automaker.
Moreover, Schrempp acknowledged in an interview with the Financial Times that he had planned to make Chrysler a division of the German-based auto giant.
"If I had gone and said Chrysler would be a division, everybody on their side would have said, 'There's no way we'll do a deal,' " Schrempp said in the interview published on Oct. 30, 2000. "But it's precisely what I wanted to do."
Despite Schrempp's published statements, DaimlerChrysler's lead outside counsel said the Kerkorian legal team has failed to produce any evidence proving the "merger of equals" was a smoke screen for a takeover.
"The plaintiffs have not come up with one shred of evidence to support their claims," said Michael Schell of the New York law firm Skadden, Arps, Slate, Meagher & Flom.
Still, lawyers for the shareholders say that Project Blitz at least demonstrates Daimler-Benz's long-term desire to buy Chrysler.
"It's another set of facts that are consistent with what Schrempp said," Eisenhofer said.
'Blitz' unveiled in '99 suit
Project Blitz came to light in an obscure lawsuit filed against DaimlerChrysler in 1999. In the suit, a Connecticut investment banker named Ralph Bachenheimer alleged that he proposed a plan in early 1997 to Daimler-Benz that it acquire Chrysler in a stock swap deal.
"It was always my idea, from day one," Bachenheimer said in an interview. "They never pursued it beforehand."
Bachenheimer claimed that he never received a fee for his work. The case was ultimately dismissed by a federal judge in Washington, D.C., because of jurisdictional and other issues.
Part of DaimlerChrysler's defense in Bachenheimer's case revolved around Project Blitz. The document outlining the project -- labeled "strictly private and confidential" -- was entered as an exhibit to show that Goldman Sachs had previously provided a specific game plan for Daimler-Benz to combine with Chrysler.
Project Blitz was drawn up by Goldman Sachs investment banker Alexander Dibelius at the request of Schrempp in the fall of 1995. That was just months after Kerkorian had made his own unsolicited, and ultimately unsuccessful, bid to buy Chrysler.
The document specifically analyzes a purchase of Chrysler by Daimler-Benz. "A Chrysler acquisition is big, but financially feasible," the document said.
Resistance anticipated
Project Blitz laid out numerous "acquisition issues" related to the financial structure of a potential buyout, including several obstacles. Among those were Chrysler's expected defense and resistance to an acquisition, and details of Chrysler's "poison pill" takeover defense mechanism.
The document also notes that Chrysler management would likely oppose an unwanted buyout, as they had with Kerkorian.
"Any approach by other parties would therefore be dependent to some extent on their cooperation," the document said.
The plan also advised that "only an all-cash deal will be acceptable for shareholders."
In 1997, Eckhard Cordes, a Daimler-Benz executive in charge of mergers and acquisitions, asked Dibelius to revise Project Blitz, court documents say. The new version said that "a significant cash component will be acceptable for shareholders of Chrysler" and suggested that "merger accounting could be applied if acquisition is done with equity."
Name betrays intentions
Lawyers in the current shareholder suit contend that Project Blitz calls into question the terms of the "merger of equals" proxy Kerkorian and other investors voted on in 1998.
Kerkorian, who owned a 14 percent stake in Chrysler at the time, claims he would never have voted for the deal if he knew German executives would dominate the newly formed DaimlerChrysler. His lawyers did not return calls for comment, but other shareholder representatives said the shareholders were deceived.
"The merger of equals concept was a charade," said Vincent Cappucci, co-lead counsel for the shareholders.
Eisenhofer also noted that the title of Project Blitz conveys Daimler-Benz's intentions toward Chrysler.
The German word "blitzkrieg" means "lightning war," a term often used in World War II to describe a surprise offensive.
"Project Blitz doesn't sound like a friendly transaction, does it?" Eisenhofer asked. "It's a war term."
Schell, DaimlerChrysler's counsel, said he was unfamiliar with the document.
"I've never heard of (Project) Blitz," he said. "I don't know what it is."
The document is a building block in the case that Kerkorian and other shareholders are preparing for trial, the lawyers said. Depositions of past and present DaimlerChrysler executives were recently completed, including those of Schrempp and former Chrysler Chairman Robert Eaton.
You can reach Sarah A. Webster at (313) 222-1463 or swebster@detnews.com.
I think everyone knows that this wasn't a 'merger'. I just think it's too late now. By the time they could actually get to court and Kerkorian gets DCX broken up (in the slim chance that would happen), I think that would doom the company. The Crossfire, Sprinter, and LXs all use Mercedes componentry, the next compact and mid-size cars will all be co-developed with Mitsubishi, all the 4-cylinder engines will be shared with Hyundai and Mitsubishi, all the diesels Chrysler uses in Europe are from Mercedes. I didn't like DCX at first, but I'm starting to like where its going.
Daimler plotted buyout of Chrysler
'Project Blitz,' hatched in 1995, detailed acquisition, not merger, lawsuit reveals
By Sarah A. Webster, and Bill Vlasic / The Detroit News
AUBURN HILLS -- A secret 1995 document detailing a potential acquisition of Chrysler Corp. by Daimler-Benz AG has surfaced in billionaire Kirk Kerkorian's lawsuit challenging the purported "merger of equals" between the two automakers.
Lawyers for Kerkorian and other Chrysler investors have seized on the 80-page plan, dubbed "Project Blitz," as evidence that Daimler plotted to buy Chrysler for years before the companies joined in 1998 to form DaimlerChrysler AG.
Kerkorian alleges Daimler-Benz Chairman Juergen Schrempp cheated him and other shareholders out of an acquisition premium by buying Chrysler under the guise of a merger of equals.
Kerkorian is seeking $13 billion in damages in his lawsuit, which has class-action status in federal court in Delaware. DaimlerChrysler has said the suit, which appears headed for a May trial, has no merit.
But if nothing else, Project Blitz -- a copy of which was obtained by The Detroit News -- shows that Daimler-Benz executives analyzed a potential buyout of Chrysler long before Schrempp negotiated a stock-swap with Chrysler Chairman Robert Eaton in May 1998.
Prepared in the fall of 1995 by Daimler-Benz investment banker Goldman Sachs Group Inc., and revised a year before the DaimlerChrysler deal, Project Blitz dissects Chrysler's finances and products, raises multiple "acquisition issues" and outlines potential obstacles to a buyout.
"It doesn't show they wanted to enter into a merger of equals with Chrysler," said Jay Eisenhofer, co-lead counsel for shareholders in the class action suit. "They wanted to acquire Chrysler."
After the two companies combined in 1998, two American presidents of the Chrysler Group were fired and German executives were installed to run the No. 3 U.S. automaker.
Moreover, Schrempp acknowledged in an interview with the Financial Times that he had planned to make Chrysler a division of the German-based auto giant.
"If I had gone and said Chrysler would be a division, everybody on their side would have said, 'There's no way we'll do a deal,' " Schrempp said in the interview published on Oct. 30, 2000. "But it's precisely what I wanted to do."
Despite Schrempp's published statements, DaimlerChrysler's lead outside counsel said the Kerkorian legal team has failed to produce any evidence proving the "merger of equals" was a smoke screen for a takeover.
"The plaintiffs have not come up with one shred of evidence to support their claims," said Michael Schell of the New York law firm Skadden, Arps, Slate, Meagher & Flom.
Still, lawyers for the shareholders say that Project Blitz at least demonstrates Daimler-Benz's long-term desire to buy Chrysler.
"It's another set of facts that are consistent with what Schrempp said," Eisenhofer said.
'Blitz' unveiled in '99 suit
Project Blitz came to light in an obscure lawsuit filed against DaimlerChrysler in 1999. In the suit, a Connecticut investment banker named Ralph Bachenheimer alleged that he proposed a plan in early 1997 to Daimler-Benz that it acquire Chrysler in a stock swap deal.
"It was always my idea, from day one," Bachenheimer said in an interview. "They never pursued it beforehand."
Bachenheimer claimed that he never received a fee for his work. The case was ultimately dismissed by a federal judge in Washington, D.C., because of jurisdictional and other issues.
Part of DaimlerChrysler's defense in Bachenheimer's case revolved around Project Blitz. The document outlining the project -- labeled "strictly private and confidential" -- was entered as an exhibit to show that Goldman Sachs had previously provided a specific game plan for Daimler-Benz to combine with Chrysler.
Project Blitz was drawn up by Goldman Sachs investment banker Alexander Dibelius at the request of Schrempp in the fall of 1995. That was just months after Kerkorian had made his own unsolicited, and ultimately unsuccessful, bid to buy Chrysler.
The document specifically analyzes a purchase of Chrysler by Daimler-Benz. "A Chrysler acquisition is big, but financially feasible," the document said.
Resistance anticipated
Project Blitz laid out numerous "acquisition issues" related to the financial structure of a potential buyout, including several obstacles. Among those were Chrysler's expected defense and resistance to an acquisition, and details of Chrysler's "poison pill" takeover defense mechanism.
The document also notes that Chrysler management would likely oppose an unwanted buyout, as they had with Kerkorian.
"Any approach by other parties would therefore be dependent to some extent on their cooperation," the document said.
The plan also advised that "only an all-cash deal will be acceptable for shareholders."
In 1997, Eckhard Cordes, a Daimler-Benz executive in charge of mergers and acquisitions, asked Dibelius to revise Project Blitz, court documents say. The new version said that "a significant cash component will be acceptable for shareholders of Chrysler" and suggested that "merger accounting could be applied if acquisition is done with equity."
Name betrays intentions
Lawyers in the current shareholder suit contend that Project Blitz calls into question the terms of the "merger of equals" proxy Kerkorian and other investors voted on in 1998.
Kerkorian, who owned a 14 percent stake in Chrysler at the time, claims he would never have voted for the deal if he knew German executives would dominate the newly formed DaimlerChrysler. His lawyers did not return calls for comment, but other shareholder representatives said the shareholders were deceived.
"The merger of equals concept was a charade," said Vincent Cappucci, co-lead counsel for the shareholders.
Eisenhofer also noted that the title of Project Blitz conveys Daimler-Benz's intentions toward Chrysler.
The German word "blitzkrieg" means "lightning war," a term often used in World War II to describe a surprise offensive.
"Project Blitz doesn't sound like a friendly transaction, does it?" Eisenhofer asked. "It's a war term."
Schell, DaimlerChrysler's counsel, said he was unfamiliar with the document.
"I've never heard of (Project) Blitz," he said. "I don't know what it is."
The document is a building block in the case that Kerkorian and other shareholders are preparing for trial, the lawyers said. Depositions of past and present DaimlerChrysler executives were recently completed, including those of Schrempp and former Chrysler Chairman Robert Eaton.
You can reach Sarah A. Webster at (313) 222-1463 or swebster@detnews.com.
I think everyone knows that this wasn't a 'merger'. I just think it's too late now. By the time they could actually get to court and Kerkorian gets DCX broken up (in the slim chance that would happen), I think that would doom the company. The Crossfire, Sprinter, and LXs all use Mercedes componentry, the next compact and mid-size cars will all be co-developed with Mitsubishi, all the 4-cylinder engines will be shared with Hyundai and Mitsubishi, all the diesels Chrysler uses in Europe are from Mercedes. I didn't like DCX at first, but I'm starting to like where its going.
01-27-2003, 07:37 AM
#2
Senior Member
Join Date: Mar 2000
Location: Southern NH
Posts: 37,274
Likes: 0
Received 0 Likes
on
0 Posts
I think the "merger" was good for both of them, regardless. Daimler was introduced to a higher scale of mass production and, sadly, allowed to see how one can effectively cut costs from distributors.
Chrysler in turn gets Mercedes-Benz software and hardware.
Chrysler in turn gets Mercedes-Benz software and hardware.
01-27-2003, 12:30 PM
#3
A little chin music
Join Date: Jun 2002
Location: Cleveland, Ohio - Rock 'n Roll capitol of the World
Posts: 2,655
Likes: 0
Received 0 Likes
on
0 Posts
Sneaky sheisters! I don't think anyone associated with Daimler-Benz at the time ever thought any of this would get out in to public. This reminds me of the movie Other Peoples Money with Danny DeVito. Sneaky crooks out to buy every weak company they can get their hands on, pretty much without the company knowing what they're selling or who they're selling to. I actually find it very intriging.
Greed, money, power. It's what makes the world go 'round.
Greed, money, power. It's what makes the world go 'round.
01-28-2003, 07:25 PM
#4
Senior Member
Join Date: Mar 2002
Location: Pittsburgh
Posts: 1,264
Likes: 0
Received 0 Likes
on
0 Posts
although their methods of merging may have been a little shady.........I still think it's a good thing that this happened....this is the first American car company I've been excited about in a long time.