DCX makes quick buck by selling Stuttgart HQ
We had always operated under the assumption that there's no quick way to make a buck in the auto business. Turns out we were wrong, as DaimlerChrysler has just sold its headquarters in Stuttgart for $308.8 million in cash to IXIS Capital Partners Ltd. Don't fret, the building's new owners won't be kicking DCX to the curb, as the automaker simultaneously signed a 15-year lease to stay on the premises. The money from the sale will boost the automaker's operating profit by $22.9 million this year, as DCX is required to report income over the duration of the lease. It's perhaps the fastest $380 million profit we've ever seen a carmaker turn, and the most creative. Chances are that if DCX is doing well in 2021, the automaker will buy its HQ right back.[Source: Automotive News]
Reader Comments (Page 1 of 1)
Will 8:22PM (10/27/2006)
Wow. Mercedes selling the company HQ. Pumping and dumping the Dodge/Chrysler/Jeep wing would be much more effective and better long term for the company.
I would respect them a hell of a lot more for it.
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iQuack 8:29PM (10/27/2006)
Good idea. Sell headquarters and operate DCX out of the back of a Caliber;-).
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Mitsufan 8:55PM (10/27/2006)
This is news? The quickest and most creative?
John, posting something you didn't happen to know doesn't make it news. A lease-back is a very common way for a company to pick up some quick cash.
http://www.finance-glossary.com/terms/lease-back.htm?id=831&ginPtrCode=00000&PopupMode=+-
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chewy 2:07AM (10/28/2006)
I guess a leaseback makes sense, but won't they pay over 308.8 million in lease over the 15 years.
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Talis 9:08PM (10/27/2006)
Wow. Somebody else is smart enough to relize that most of what AutoBlog reports is not news at all! Thank you Mitstufan for pointing out the obvious.
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sleepera8 10:25PM (10/27/2006)
always a good way to bump the operating income.
good for the stock price, but few will remember it @ year end.
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wilson britman 11:19PM (10/27/2006)
amen 3. reporting news like this is fine, but maybe you should do some research before you editorialize. childlike wonder is only cute in children.
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retsel 11:48PM (10/27/2006)
kinda like selling your TV to buy a DVD player then renting your tv back to look at movies... its retarded...
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John Neff 12:04AM (10/28/2006)
#3 Really? I'm sure it might be for someone who follows business and corporations for a living, but I've been starting at a computer screen for a year and a half looking at auto news, and as far as I know an automaker hasn't done this in the past year and a half. Does anyone know when the last time was an automaker had sold its headquarters and leased it back? I also think it's a little bigger news when an automaker who just reported Q3 earnings that were less than expected does something like this.
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Talis 12:38AM (10/28/2006)
Retsel:
It's smart in this case, because DCX adds 380 million to this year’s profits, and only expenses say one million a year in rent. For DCX to make no profit at all over the life of the 15-year lease, it would have to pay over 25 million a year in rent. I do not think that is the cost of rent so DERRR, this is a good business decision. Take a business finance class and you'll understand how this concept works.
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Mike Razpezdaev 1:33AM (10/28/2006)
#5, sorry won't work. Stock price goes up or down usually when big players buy or sell stocks--institutional investors. And those guys read the fine print, they know where the money comes from.
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retsel 5:55AM (10/28/2006)
Talis::
u MORON... this is the mark of desperation... u are making assumptions on the fundamentals... u dont know the rent or the tax status they will lose by selling the property and if they want to buy the property back at the end of the lease the appreciation will force them to pay more for it that they sold it for... they are robbing peter to pay paul...
you have no idea who you are talking too so drop it...
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smokeydog001 8:38AM (10/28/2006)
It would be news if DCX moved its headquarters to Albania.
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Tommy 9:18AM (10/28/2006)
The writers here are idiots as far as overall intelligence, but they don't miss much in terms of news content itself. I liken them to well-trained rats.
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Richard Warren 12:05PM (10/28/2006)
#3 Right with you, a more common business practice than some might think. It's a quick cash flow fix.
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Edward 2:10PM (10/28/2006)
John Neff: give it up. #3 is right. Companies, big and small, do this all the time. That's where real estate MANAGEMENT companies come in. Do you think DCX owns 100% of the Chrysler building in NY? Do you think GE owns 100% of the GE Building? You can't look at this and say it's news just because you haven't heard auto companies do this in the past year and a half. This is fully a matter of capital allocation. But, if you insist on looking into auto companies alone...heck, I bet you money if you look closely into their reports, there is probably a similar kind of deals with one of their real estate properties (plants, branch offices, etc etc). Appreciate the reporting, throttle down on the editorializing if you don't fully understand the subject.
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tariq 3:23PM (10/29/2006)
#3 #15 and #16
u three and john neff are all correct. only problem is, u are talking about three differnt subjects.
john neff is talking about car news because this is wot he does at AUTOblog. such buy-back thingy maybe common in finance but in the automotive world this does not happen often. i myself hav not heard of such a thing, IN THE AUTOMOTIVE INDUSTRY for the last three years even though many companies hav had cash problems:
Rover
proton
ford
chrysler
GM
produa
mitsubishi
fiat
isuzu
Daewoo
lotus
Delphi
and some other american supplier(cant remember the name)
ps i added chryslers list, cuz this incident was 'new'
there may be many others.
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