DaimlerChrysler Breakup?

Eight years after it bought the US automaker Chrysler, German carmaker DaimlerChrysler is believed to be mulling a sale of the loss-making division.

"We would be completely thoughtless if we were not preparing an exit strategy," an unidentified member of the DaimlerChrysler board was quoted by the weekly German magazine Der Spiegel as saying.

In October, DaimlerChrysler sales in the United States fell by 2 percent compared with the same month a year earlier, even though Mercedes-Benz dealers reported their best October ever, the group said Wednesday.

Financial director Bodo Uebber told reporters last week: "We are not ruling out anything."

Sales fall in US

DaimlerChrysler shares have gained more than five percent in the past week, and closed on Wednesday at 45.69 euros ($58.31), a gain of 2.21 percent on the day.

Third-quarter results published last week were underpinned by the German division Mercedes, while Chrysler, which also includes the Dodge and Jeep brands, posted an operating loss of 1.2 billion euros.

The Chrysler catalogue is comprised in large part of four-wheel drive sports utility vehicles (SUVs) and pick-up trucks, but US consumers are beginning to favor cars that consume less gas because of higher prices at the pump.

Sales by the Chrysler Group fell by 3 percent to 159,586 vehicles, while Mercedes sales surged by 12 percent to 20,598 vehicles.

Over the first 10 months of the year, DaimlerChrysler's US sales were down by 7 percent, reflecting a 9 percent drop in Chrysler brands and a 13-percent increase in Mercedes sales.

A restructuring plan needed

Chrysler must now come up with its third restructuring plan since 1998, and seven teams have left Germany for Detroit to rethink models, production and factories.

But after shedding 38,000 jobs between 2000 and 2005, Chrysler's room for maneuver is limited, though the company is in talks with the Chinese automaker Chery about a plan to import smaller cars under the Dodge nameplate and with Germany's Volkswagen about fuel-efficient technology.

But renovating product lines can take several years and Chrysler is running out of time.

In their best interest

For DaimlerChrysler, unloading the company might be in its best interest.

German rival BMW did that with the heavily indebted Rover brand, asking a symbolic price of 10 pounds (15 euros) to get rid of the problem, and has been reaping benefits ever since.

"I think they want to keep all their options open," WestLB analyst Lars Ziehn said.

Without Chrysler, Daimler's market value, including the Mercedes brand, its heavy-truck division, a financial services group and a major stake in the aerospace group EADS, would come to around 54 billion euros, according to analysts.

DaimlerChrysler's current market value is roughly 44 billion euros, they added.

"We could imagine several scenarios, but an outright sale of Chrysler appears unlikely as long as it remains in the red," said Georg Sturzer, an analyst at HVB.

Other possibilities include spinning off the unit and listing it on the stock exchange, or finding an automaker that wants to enter the huge US market and could use Chrysler plants.

Volkswagen, which is present in the United States but which builds the cars it sells there in Mexico and Europe, might be tempted, analysts said.