The top brass at Magna International Inc. -- the giant Canadian supplier considered to be the leading candidate to take over the Chrysler group -- already has a vision of what's needed to fix the troubled automaker.
High on the list: Reduce the number of Chrysler group dealerships.
Sometime this month, DaimlerChrysler AG is expected to choose a lead bidder to negotiate the sale of the U.S. automaker, which Daimler-Benz bought nine years ago for $36 billion.
To prepare for the next round of negotiations, Magna executives are working seven days a week to analyze the Chrysler group's strengths and weaknesses. Informed sources say Magna's brain trust has reached some conclusions:
- Maintain an alliance between the Chrysler group and Mercedes-Benz. Sources say Daimler would retain a minority stake in Chrysler and a key role in its management. That would allow Mercedes and Chrysler to share more parts and products.
- Shrink Chrysler's dealer network. That's the key to a more profitable, efficient company, but it will take time. Chrysler has about 3,750 dealerships, and some analysts say the company should trim 1,000 stores.
- Keep Chrysler's management. CEO Tom LaSorda is well-regarded and could easily stay on. Magna has a stable of experienced executives who can work with him or run the Chrysler group if LaSorda leaves.
- Encourage Chrysler and Mercedes to share more parts. The two organizations are eager to share powertrain parts and electrical components.
Sources say there are other areas of potential cooperation. Magna International division Magna Steyr eventually could receive contracts to produce some DaimlerChrysler vehicles in a low-volume North American assembly plant. For Magna Steyr, that dream has remained out of reach - until now.
A deal by June?
A sale agreement should be announced within a couple of months. Time is not on Chrysler's side. Employees, dealers and suppliers are worried about Chrysler's future.
Magna is still doing due diligence, yet sources say a deal to buy Chrysler could be negotiated as early as June.
Magna could still lose out. The other contenders - private equity groups Cerberus Capital Management and Blackstone Group - have submitted bids and are still in the picture.
But Magna and its financial partner, Onex Corp., appear to have the upper hand. For starters, Frank Stronach, Magna's 74-year-old founder and chairman, is well-known to DaimlerChrysler executives.
And Chrysler's biggest labor unions favor Magna because of its long industry track record. The UAW and the Canadian Auto Workers fear the other bidders might break up Chrysler and sell it in pieces.
Magna isn't likely to do that, says Christoph Stuermer, an analyst for Global Insight in Frankfurt. "It makes so much sense to put an existing business, existing brands, an existing retail network on a new foundation rather than feed it to the fish and have it chopped up by financial investors," Stuermer says.
Magna's brain trust
If Magna does end up buying Chrysler, it has a strong stable of executives ready to manage the takeover.
- Herbert Demel, 53, head of the Magna Steyr subsidiary, has been an active member of Magna's Chrysler task force. Demel is a veteran. He has run both Audi AG and Fiat Auto. The unit he now heads builds low-volume vehicles in Graz, Austria, for DaimlerChrysler and others.
- Magna President Mark Hogan, 55, heads the supplier's $22 billion global automotive business. Some insiders view him as a possible CEO of Chrysler. But Hogan is close to LaSorda, which could bolster LaSorda's chances of staying on.
- Siegfried Wolf, 49, co-CEO of Magna International, is leading the Magna team studying the Chrysler bid. He has also run Magna's European operations.
- Don Walker, Magna's co-CEO, is a longtime Stronach ally. The 50-year-old executive previously ran Magna's seat making operation.
You may e-mail Bradford Wernle at [email protected]
You may e-mail David Barkholz at [email protected]