DaimlerChrysler today announced that it is open to the possibility of dropping the loss-making Chrysler group from it’s organization structure, or finding new partners for the American automotive group. Previously, DCX stood by Chrysler with a long-term commitment since it’s merger in 1998, but perhaps a predicted operating loss of more than US$1.31 billion foreseen by analysts – the third full-year loss since the merger is just too much for DCX to take. This loss will be offsetted by an earnings rebound at premium passenger car division Mercedes Benz and solid results from its market-leading truck manufacturing division.
The announcement pushed Chrysler stock up by more than 5%, up to it’s highest level since June 2002 – peaking at US$67.43 per share. DCX CEO Dieter Zetsche is expected to announce that an investment bank has been hired to review strategic options for the group. However, divesting the two groups is easier said than done, as cutting apart the two companies would cost an estimated US$34 billion, eclipsing DaimlerChrysler earnings, which is expected to be US$1.92 billion for the Q4 of 2006.
I find it funny that such an announcement should be made, announcing the possible separation of two lovers that were never meant to be on Valentine’s day.