DETROIT - Juergen Schrempp may be knocking on the door of Detroit Diesel Corp., but Vice Chairman Tim Leuliette is not ready to let him in.
The chairman of DaimlerChrysler has stated that the automaker wants to buy Redford, Mich.-based Detroit Diesel from parent Penske Corp. But Leuliette, who is also president of Penske, said he has not received a 'viable' offer yet for the heavy-duty diesel engine maker and is pursuing a strategy of independence for now.
'We are a public company and we must entertain any viable proposals that people may make, but it's not our policy, nor are we pursuing the sale of this company,' Leuliette said. 'I would say that we are going exactly in the opposite direction.'
At a press conference in Germany on March 31, Schrempp cited only Detroit Diesel as a likely acquisition candidate in the wake of failed talks with Nissan Motor Co. Ltd.
'We would very much like to acquire the majority or take over the whole of Detroit Diesel,' Schrempp said. 'But we are not prepared to pay any price. The facts are on the table, but we have no agreement so far.'
Detroit Diesel had worldwide sales of $1.69 billion in 1998 and ranks 25th on the Automotive News list of Top 150 suppliers to North America.
The ties between DaimlerChrysler and Detroit Diesel already run deep. DaimlerChrysler owns a 28 percent stake in the engine maker. Detroit Diesel builds engines for Freightliner Corp., a DaimlerChrysler subsidiary. And Detroit Diesel's VM Motori subsidiary, based in Cento, Italy, supplies small diesel engines to DaimlerChrysler plants in Austria and Brazil.
Leuliette acknowledged that strategic discussions between DaimlerChrysler and Detroit Diesel have taken place but said there is no offer on the table.
Analysts are not surprised that Detroit Diesel Chairman Roger Penske may be reluctant to sell. He and Leuliette have revamped the company with wide-ranging initiatives aimed at boosting its appeal to Wall Street. They include:
A new agreement with the UAW giving management a freer hand to cut costs
A successful new line of giant marine and off-highway engines called the 2000
A forthcoming redesign of the popular Series 60 heavy-duty truck engine code-named ISX
A small V-6 turbodiesel code-named Delta, which Leuliette said is being considered for four different light-truck programs
However, despite a string of quarterly earnings increases through last year, the company's share price has refused to budge from the low $20 range.
'The critical issue is really one of valuation,' said stock analyst Lisa Shalett of Sanford C. Bernstein in New York. 'The stock hasn't done very well as investors in the U.S. have been wary of the cycle of the heavy-duty truck segment.'
Penske 'is probably looking at all of his options,' said analyst Charles Harris of Goldman Sachs in New York. 'Does he need to turn around and sell Detroit Diesel today? No.'
Leuliette acknowledged Detroit Diesel's current share price would be a sticking point to a potential sale.
'Detroit Diesel at anything less than 30 bucks (per share) is giving the company away. We're not here to give the company away.'