Chrysler’s thermal products operation in Dayton, Ohio, is at least one unit on the block. Zetsche confirmed that the company is in discussions with German supplier Behr GmbH & Co. and other interested parties regarding the plant. Chrysler’s trim plant in Ajax, Ontario, may be another divestiture target, Zetsche indicated. Chrysler also has glass, axle, electronics, transmission, foundry and casting plants.
The possible divestitures are part of the company’s restructuring efforts. Removing noncore parts businesses would shrink Chrysler’s asset base and allow the company to focus its resources better, Zetsche said. Though the merger and acquisition market is depressed, possibly limiting the value of the parts operations, the actions also could raise much-needed cash for the troubled automaker.
“Money never hurts, so that is a question you never could deny,” Zetsche said.
Decisions may be made on one or two operations in the future, he said. In addition to a sale, outcomes also could include joint ventures or partnerships.
Discussions ongoingChrysler is discussing the strategy with the unions representing workers of the targeted businesses, Zetsche said. The International Union of Electronic, Electrical Salaried, Machine and Furniture Workers represents the nearly 2,000 workers at the Dayton thermal products plant. The UAW and Canadian Auto Workers represent the other Chrysler parts businesses.
A Behr purchase of the thermal products division could help the German supplier fulfill its North American growth strategy. The company wants to more than double its U.S. sales to at least $500 million and capture 10 percent of the light-vehicle market’s engine-cooling and climate-control business by 2005. Behr is the main supplier of engine-cooling systems for Mercedes-Benz in Germany and already has strong ties with DaimlerChrysler.
The negotiations follow a pattern set this year when DaimlerChrysler sold the majority of its Temic electronics business to Continental AG. Continental bought 60 percent of Temic with the rights to purchase the remainder of the company by 2005.
Opportunity for suppliersParts makers may see a ripe opportunity in taking over some pieces of Chrysler’s components operations. They likely will be guaranteed an order book of business with the purchase, industry analyst Scott Upham said. But some of the low-margin, asset-intensive operations such as the glass plants are unlikely to attract much interest. The union representation at the plants will be another barrier for some potential buyers.
In addition to the Chrysler group operations, components businesses on the Mercedes side of the business also are likely divestiture targets, said Upham, president of Providata Automotive of Ann Arbor, Mich. Those may include some powertrain operations in Germany.
“Everything is on the table really,” Upham said. “They’re looking to cut costs, and they’re looking to get out of the parts business.”