Garage Storage Organization and Garage Cabinets

2TONE_93GT · 11-13-2005, 07:38 PM

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Nov. 11 (Bloomberg) -- DaimlerChrysler AG, the world's fifth- largest carmaker, sold its stake in Mitsubishi Motors Corp., ending a five-year attempt to gain a foothold in the booming Asian market with a local manufacturer.

DaimlerChrysler will book a gain of about 500 million euros ($585 million) on the sale of its 12.42 percent stake, the Stuttgart, Germany-based company said in a statement today. Mitsubishi Motors shares have almost tripled this year.

Chief Executive Juergen Schrempp paid a total of $2.2 billion for a 37 percent stake in Mitsubishi in 2000 and 2001, when automakers were spending to expand in China and Southeast Asia. DaimlerChrysler now is selling assets to focus on increasing profit at the Mercedes Car Group and at Chrysler in the U.S.

``This is the final unraveling of a big part of Schrempp's plan,'' said Michael Raab, an analyst at Sal Oppenheim in Frankfurt. ``The timing is pretty good and it's a nice conclusion to the year.''

Shares of DaimlerChrysler rose as much as 1.01 euros to 42.97 euros and closed up 1.6 percent at 42.65 euros in Frankfurt. The stock, up 21 percent this year, is still down 41 percent since Daimler took over Chrysler Corp. in 1998. The Mitsubishi Motors shares are being sold to institutional investors through Goldman Sachs International.

The Japanese carmaker overhauled its management, cut costs and developed new vehicles to improve its performance. Mitsubishi Motors stopped making unprofitable models including the Diamante luxury sedans, reduced advertising costs and axed jobs in Normal, Illinois and southern Australia.

Sales Plunge

Vehicle sales plunged for two years after Mitsubishi Motors admitted to hiding defects and customer complaints, pushing it to a record 215.4 billion yen loss in the 12 months ended March 2004.

DaimlerChrysler declined to participate in a $6.4 billion bailout of Mitsubishi Motors last year, allowing its holding in the Japanese carmaker, once as much as 37 percent, to shrink. Schrempp's plan was scuttled when all but two board members opposed putting more money into Mitsubishi Motors.

Sales in China surged 76 percent in 2003 and 15 percent last year, compared with a stagnating market in Europe for the past three years.

Schrempp, 61, will step down at the end of the year, leaving Dieter Zetsche, who led a reorganization of Chrysler and now leads Mercedes, in charge of the DaimlerChrysler. Zetsche, 52, was among those opposed to giving more aid to Mitsubishi Motors.

DaimlerChrysler paid a total of $2.2 billion for its 37 percent stake in the Japanese carmaker, first buying 34 percent for $1.9 billion in 2000, then 3.3 percent from Volvo AB a year later for $297 million.

Labor Costs

DaimlerChrysler faces a charge of about 950 million euros to pay for workforce reductions at Mercedes's German factories. The company is eliminating 8,500 jobs through voluntary departures and early retirement and is spending as much as 1.2 billion euros to fix the unprofitable Smart small car business.

The company is also in talks to sell its MTU Friedrichshafen heavy engine division. Analysts expect the sale to be worth about 1.1 billion euros.

``It's a logical tidying up of their portfolio,'' said Stephen Cheetham, an analyst at Sanford Bernstein in London. ``With 2 billion euros worth of restructuring costs for Mercedes and Smart this year, it makes perfect sense.''

The timing of the sale of almost 550 million shares was a reflection of the share price at Mitsubishi Motors, said Thomas Froehlich, a DaimlerChrysler spokesman. Details will be made public by the end of the month after the deal is completed.

`Legal Progress'

``Mitsubishi Motors has made real progress with their restructuring,'' he said, declining to provide the sale price for the stake.

Mitsubishi Motors shares have increased 156 percent this year. The stock fell as much as 13 yen, or 4.2 percent, to 294 yen and closed down 2.6 percent at 299 yen in Tokyo today.

Mitsubishi Motors yesterday said its first-half loss narrowed 64 percent after domestic sales increased and a weaker yen inflated its overseas earnings. The maker of Pajero sport-utility vehicles is trying to return to profit in the year starting April 2006 after it received financial bailouts twice since May 2004.

Higher sales of Colt compact cars and eK minicars helped revive domestic sales every month in the past six months from a yearlong slump in 2004 when admitting hiding vehicle defects deterred customers. The company's net loss narrowed to 63.8 billion yen ($542 million) in the six months ended Sept. 30 from last year's 178.8 billion yen.

Common Projects

``The current cooperation projects of DaimlerChrysler and MMC will not be affected by the disposal, and will continue as previously agreed,'' DaimlerChrysler said in the statement. The two companies cooperate on the Mitsubishi Colt and Smart ForFour models and Mitsubishi will build the engine for the next generation of the Smart ForTwo.

``Eventually Daimler and Mitsubishi will have a joint venture relationship,'' said Sanford Bernstein's Cheetham.

DaimlerChrysler said Ruediger Grube, 54, management board member responsible for strategy and Chinese operations, resigned from his position on Mitsubishi Motors' board.

The German company also sold a 10.5 percent stake in South Korea's Hyundai Motor Co. last year. In 2000, DaimlerChrysler planned to form an alliance with Hyundai to make up to 100,000 trucks and buses and 50,000 engines every year in South Korea, and to build small cars.

DaimlerChrysler is left with a majority stake in Mitsubishi Fuso, which makes commercial vehicles for the Asian market and has begun to expand into Europe. The company is now trying to expand in Asia using the Mercedes and Chrysler brands.