Filed under: Chrysler, LLC., Daimler, Mercedes-Benz, Earnings/Financials
Daimler reduces book value of Chrysler stake by two-thirds
Daimler may have divested 80.1% of its ownership in Chrysler, but the German automaker is still feeling pain from the Pentastar. The value of Daimler's portion of Chrysler has dropped from $2.18 billion to $852 million not even a year after the two parted ways. The loss of nearly $1.4 billion in value is a fair chunk of change, even for the mighty Daimler, but the news is not all bad for company shareholders. If Daimler hadn't sold Chrysler to the private equity firm Cerberus as fast as it did, the automaker's stock would likely be in much worse shape.
Since the privately owned Chrysler, LLC doesn't have to report earnings, it claims that its fiscal standing is all peaches and cream. According to Chrysler, the company has had positive earnings since it was bought out by Cerberus last year. The official line that explains the discrepancy with Daimler's reporting is that U.S. accounting rules are much more favorable than those overseas. Damn accountants.
[Source: Automotive News - subs. req'd]
Reader Comments (Page 1 of 2)
Frank 11:54AM (5/01/2008)
"but the German automaker is still feeling pain from the Pentastar. "
Not like the pain that Chrysler has felt from the mismanagement of Daimler and the disappearence of it's cash hoard worth billions of dollars.
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aa[ro]n 9:40PM (5/01/2008)
well said
they screwed chrysler over
Soccer Mom 12:02PM (5/01/2008)
Go Europe!
"Merger" of D-C is just another reflection of some specific European practices that don't really work. Like France, for instance, invited tons of uneducated unskilled immigrants it didn't need, shoveled them in suburbia without jobs and any prospect to get a job, and now wonders why there are nightly riots.
Same goes for Daimler - purchased - sorry, merged - a company, choked it to death with bureaucracy and red tape, and lost tons of money as a result. Great business minds at work.
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Val 12:51PM (5/01/2008)
If you are american, you are seriously kidding about inviting uneducated unskilled mexic... uh, i mean immigrants. And if the american car industry is all so powerful, why is it having its ass kicked by the japanese on home soil? Why was it that Daimler bought chrysler and not the other way around, if chrysler was swimming in money? Why did their shareholders agree to the deal in the first place? How come this dumbass european company called daimler AG has a net income of 9 billion Euro (13.9 bn usd, so don't feel bad about daimler losing money on the deal.) and GM has a net income of -39 bn USD? And thats a company thats on the verge of turnaround, so imagine whats going on at chrysler? It is actually obvious that this situation is a result of the 2 bn usd that GM had to pay FIAT 5 years ago to get out of that joint venture, just dont ask how 2 bn became 39 bn... Fiat was on the verge of bakrupcy and is now making a net income of 2 bn Euros a year, while GM europe (opel) had to struggle keeping its factories in germany open. I guess europe has no clue about cars.
Soccer Mom 12:58PM (5/01/2008)
Val, perhaps in your statement you want to group things together or otherwise you get a stew of facts, fiction and other right and not-so-right things.
The discussion, as you might have noticed, is about Diamler getting pinched again by its marvelous purchase of Chrysler. There are no discussions on the overall IQ of GM management vs. that of the European maker. Losing $30 billion dollars only because you put your ego before your business is not the smartest thing one can do.
Val 1:04PM (5/01/2008)
You are right that it is not very organized or anything, and the argument is not europe vs us, but words like "go europe" and the "french immigrants" are exactly as relevant to the topic as are my babblings (i.e. they are totally irrelevant). This was a comment no a comment, not so much on the article, which is kind of retarded, but hey, it's the internet after all, this is to be expected. Oh, and where in my post did i just make things up just to prove a "point"?
Val 1:07PM (5/01/2008)
sorry, i meant europe vs GM management, not USA in general.
Soccer Mom 2:21PM (5/01/2008)
You didn't. The loss GM incurred was due to the changes in accounting practices, encompassing changes in tax benefits for many years, so it does not a true representation of performance of the company.
My point is the only reason why D-C collapsed was the ego problem - on every level Daimler felt superior to Chrysler and instead of sharing ideas it spent all its time on treating Chrysler as its worst enemy. You might want to do it to your competitor, but to the partner with whom you are financially linked? Plain stupid.
Injun Joe 12:27PM (5/01/2008)
Addressed to "Frank" and "Soccer Mom:" Agreed and agreed.
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wally 12:37PM (5/01/2008)
Daimler has always shifted Chrysler's profit to Mercedes thru royalties placed on Chrysler. Valuing Chrysler lower will make them look better!!! Let's see how they perform in 2009?
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Soccer Mom 12:46PM (5/01/2008)
People are not stupid, especially those who are interested in reading financial statements. It will not take an accounting genius to differentiate losses from minor stake in other companies vs. losses/gains from selling cars.
wally 12:38PM (5/02/2008)
"Cash is fact," says Chrysler LLC product guru Jim Press, "and profit is fiction.
Interesting aphorism coming from a guy whose privately held company is obliged to disclose neither to the public. But in a town that for decades has measured success by the market share its automakers claim and the profits they book with accounting gimmicks -- instead of actual cash generated -- the former Toyota Motor Corp. exec has it exactly right.
Frank 12:43PM (5/01/2008)
The picture reminds me of the 3 Stooges:
Dieter is Moe, he kicks everybodies butt, takes credit for anything good that happens, and blames others for anything bad.
Tom Lasorda (on the left) - is Larry, his motto is "can't we all just get along?".
Feinberg (in the middle) is Curly. He doesn't know what the hell is going on or what he is doing.
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MemphisNET 1:35PM (5/01/2008)
Nickle & Dime-ler bought Chrysler during their most profitable years, bled them dry, then blamed any and all problems on them. They cheaped out primarily because no Chrysler should EVER be on the same playing field as Mercedes (and very well could have, 300C AND fab interior.. could have been) and because they fed money into their own devs.
No tears for Merc here.
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tanooki2003 1:54PM (5/01/2008)
Chrysler was, to simply put it, just one very very bad investment.
It would be wiser to invest the money on a yacht and 100 mansions than Chrysler.
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tanooki2003 1:56PM (5/01/2008)
Nissan and Cherry you both should get out while you are both ahead. Learn from Daimler's biggest investment blunder.
psarhjinian 4:02PM (5/01/2008)
Sorry, but Chrysler's current state is the _result_ of Mercedes' mismanagement, not despite it. They may not have been high-flying before, but the post-DCX trainwreck is particularly telling.
Products in the pipe before the merger:
* 300M, Intrepid, Concorde
* 300C, Magnum (Mercedes supplied only suspension and transmission; the design and concept was all Chrysler)
* PT
* Caravan
* Wrangler
* Viper
* Ram
* old Sebring, Avenger
* Dakota
Products from the early stages of the merger (mostly Chrysler, with some input from Merc)
* Neon SRT
* Charger
* Liberty
* Durango
Products directly developed under Merc's direction:
* Crossfire
* Compass, Patriot
* Challenger
* Commander
* new Sebring, Avenger
* Caliber
* Nitro
* Aspen
* new Viper
* Sprinter
* new Wrangler (incl four-door)
* new Caravan/T&C
I think you get the idea. Mercedes took a decent--if occasionally uninspiring--lineup and thoroughly trashed it. Other than the vans, Viper, Wrangler and Sprinter, everything Mercedes shepherded was a mistake. And you'd really have to try hard to screw up the four that weren't, so I don't exactly give them credit.
I don't think it was malice, though, as Merc was screwing up their own model line (A, R, ML) at the same time. The problem is that Chrysler doesn't have the immunity that Mercedes' badge appeal affords and suffered much more.
Uncle Ant 4:43PM (5/01/2008)
I'd have to agree with psarhjinian. Of course it's not like anyone ever accused MB of making good cars any time in the last 20 years.
Brandon 1:59PM (5/01/2008)
Come On you know they did just as bad as everyone else did and why there not dishing out there numbers is because of that fact
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mroverlord 6:37PM (5/01/2008)
Chrysler was the most profitable car company (on a per-dollar invested basis) than any other car maker in the world when Daimler acquired them. Chrysler had BILLIONS of dollars in liquid assets. That is why Daimler wanted them. In the early 2000s Chrysler was profitable while Mercedes sales tanked and they were loosing money. When the shoe was on the other foot, Daimler opted to dump Chrysler.
The ME-412 was a prime example of Mercedes oversight of Chrysler. The ME-412 was a ready-to-build supercar, and was highly regarded by the car mags that drove it. The only problem is that it's performance made the McClaren SLR look bad, so they never let Chrysler build it.
This type of meddling by the Germans is apparent in their immediate liquidation of all of Chrylser's executives after the "merger".
I hold Daimler personally responsible for Chrysler's current state. I hope Chrysler recovers and buys out Daimler, just to teach them a lesson.
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