Demo dumper sticks by his guns
Because of all the excitement over my March 30 letter concerning demos, I offer the following:
In response to Greg DeFoor, whose May 18 letter chastised me as a 'bean counter,' I would urge him to read the letter printed before his. That letter was from a dealer who killed demos 10 years ago and said it was the best thing he ever did.
Dealers understand the liabilities involved with demos, and they understand the cost of going through an Internal Revenue Service audit.
The only negative responses to my letter came from DeFoor and a salesperson. I believe that both are afraid of losing their demos rather than looking out for the best interest of the dealership, which is my job.
WILLIAM A. NESDORE, CPA
Ickert & Co., CPAs
Linkup is really a takeover hedge
Despite all the media hoopla, the Daimler-Chrysler 'merger' is really just a 'poison pill' stock play to prevent a hostile takeover of either company. Chrysler is a prime takeover target with
$16 billion in cash. Daimler's situation is similar.
With the deal valued at $30 billion or so, a hostile buyer could get all of Chrysler for about 50 percent of the market value because the cash in the bank would offset the rest.
With the formation of a new company, the controlling interest in both companies' stock has been placed in strong hands. It does not appear to be a buyout or a merger, as reported in the media, but is instead the creation of a holding company.
Government approval is needed before the deal can be finalized, and I suspect that Chrysler's largest shareholders (Kirk Kerkorian et al.) may still have something to say about it.
If it goes through, I do not expect many engineering, marketing or design benefits to accrue to either unless one of them decides to change its entire corporate philosophy.
Mercedes-Benz uses older technology to build products with a focus on durability. Chrysler builds vehicles as commodities with an eye on frequent buyer replacement and modern, low-cost production facilities.
Those two market approaches are not compatible, so don't look for much synergy to come out of this marriage except the poison pill protection against a hostile takeover of either company.
Best Warranty and
Coeur d'Alene, Idaho
DaimlerChrysler should pay taxes
Way back when Chrysler Corp. was facing doom, many union, corporate, civic and federal government leaders went to Washington and to banks throughout the world to beg for loans to keep the company afloat.
The plan worked very well. President Carter signed the Chrysler Loan Guarantee Act.
The U.S. government, bankers, lawyers and others reaped hundreds of millions in profits from Chrysler's recovery. It was profitable for all concerned.
I remember the bumper stickers that told the world: 'The New Chrysler Corporation,' 'We Can Do It' and 'Thanks, America; Now It's Up to Us.' And when the loans were repaid early, we boasted, 'We Did It.'
But that was then. This is now.
An article in the May 21 edition of the Chrysler Times clearly states, 'Merged firm would save on taxes by incorporating in Germany.' In my opinion, calling that 'as tax efficient as possible' is a slap in the face to the American people and is despicable. The article further says, 'Given the way U.S. tax laws work, by using the AG approach, DaimlerChrysler would have to pay less in taxes.'
What a bunch of bull.
The DaimlerChrysler deal is worth about $38 billion. A few million more in taxes to the U.S. government and to the people who stood behind the Chrysler bailout seems to me to be fair recompense.
It would be sheer nonsense for the U.S. government to allow this international conglomerate to go ahead without some form of payback. As American taxpayers, we deserve better than that. I hope the U.S. lawmakers will demand that DaimlerChrysler pay its fair share of taxes.
It is public record that Chrysler leadership realized hundreds of millions of dollars in stock option profits from this proposed merger/takeover. When Chrysler came running with hat in hand, the U.S. government responded in a positive manner. It only makes sense that by paying its fair share now, DaimlerChrysler will be doing the right thing.
UAW member and
Center Line, Mich.
Numbers don't always tell all
The mantra of 'shareholder value creation' is shown clearly in the Daimler-Chrysler merger transaction. Based on their 1997 annual reports, Chrysler achieved operating income of $3.4 billion; Daimler-Benz, $1.2 billion.
Based solely on those numbers, one would think that Chrysler's shareholders would control the lion's share of DaimlerChrysler after the merger. Yet Daimler's shareholders will own 57 percent of the combined firm and Chrysler's stockholders only 43 percent.
This case illustrates clearly that the business press too often focuses on profit and sales figures as opposed to market capitalization. While they are useful numbers, sales and profits fail to incorporate risk into the equation.
The capital markets appear to view Chrysler (and its counterparts, General Motors and Ford Motor Co.) as higher-risk and slower-growth entities than Daimler-Benz. Accordingly, despite its higher operating profit, Chrysler sold at a price-earnings multiple considerably lower than that of Daimler-Benz and about one-third the overall stock market price-earnings multiple in the United States.
Also, note that the merger values Chrysler at about $38 billion, about 80 percent higher than the value one year ago.
Interestingly enough, GM, a much larger entity by sales volume, has a stock market valuation of about $46 billion. In fact, GM, the nation's largest industrial company by sales volume, is rated only about No. 50, based on stock market capitalization.
Professor of Finance
Sticking up for van converters
Regarding your April 6 article: As usual, the vehicle manufacturers are going to make everything better for the shaky van conversion industry.
I would like to point out a few facts to those gentlemen who would emancipate the conversion industry from shag carpet and mood lights.
Most of the improvements to their cargo/conversion van chassis have been driven by the needs of the van conversion industry. The federal government mandated the rest.
This small segment of the automotive world responds to the needs of its customer base at 'warp speed' when compared to the vehicle maker segment.
All the fresh design ideas mentioned in your article have been done by one or more converters in the past 20 years (been there, done that).
The major erosion of van conversion sales is really due to a couple of things: the popularity of the much-overrated sport-utility and the way the bailment gurus have locked out the converters from the hot, popular chassis.
As members of the American public will learn, their sport-utility that replaced their van conversion is a whole lot less comfortable, no more economical and a lot less flexible. At this date, no one can predict what will happen to that market segment, but many sport-utility owners will soon discover the big secret: Their chic vehicle is just a converted truck.
& Upholstery Inc.
Lincoln LS6 must be fun to drive
Thank you for printing my letter on the rumored demise of the Taurus SHO, which, coincidentally, appeared in the same issue (April 13) as a preview of the Lincoln LS6 and LS8.
Those new baby Lincolns are clearly a step in the right direction, but a similar (and bigger) problem exists down in the soft mid-market, where, even after decontenting, more and more import buyers continue to choose 'fun to drive' as the purchase incentive.
The careful reader couldn't help but notice that the LS6 will feature a tuned version of the 3.0-liter Duratech V-6 and a five-speed transmission. Hmmm.
Recognizing that leasing a luxury sedan doesn't work for everyone, we can only hope that this 'Taurus-derived V-6' will be offered in the mid-market fun-to-drive category that is currently occupied by a growing number of formidable import brands.
THOMAS M. LINSLEY
The writer sells material-handling systems.