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Chrysler auction reportedly imminent


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Chrysler auction reportedly imminent

J.P. Morgan to kick off sale; car maker may make clean break from unit

By Simon Kennedy, MarketWatch

Last Update: 7:32 AM ET Feb 19, 2007

LONDON (MarketWatch) -- DaimlerChrysler is set to launch an auction for its Chrysler unit as early as this week by sending information on the struggling division to several potential bidders, according to a published report.

The Times of London reported on its Web site Monday that the car company's adviser, J.P. Morgan, will provide interested parties with private information, such as data on current trading, as part of the auction.

The value of any deal remains unclear, though analysts at Citigroup suggested investors might be happy with a "clean break" from the division, with no money changing hands but health-care liabilities passing to the new owner.

"In Detroit, some homeowners with negative equity have been known to push their keys through the letterbox and vanish. DaimlerChrysler may be looking to seek a similar walk-away solution for its Chrysler property," said Citigroup analyst John Lawson.

Shares in the car maker have rallied in the previous few sessions after it said all options remained on the table for Chrysler and following reports that it was in high-level talks with General Motors Corp. (GM : GM36.34, -0.10, -0.3% ) that could lead to a deal between the two companies.

The Times reported, citing banking sources, that talks between DaimlerChrysler and potential bidders are at an early stage.

Separately, The Wall Street Journal reported that large car companies from Asia, Europe and the U.S. have approached DaimlerChrysler about buying or forging an alliance with Chrysler.

Private-equity firms are also thought to be interested in the division, while a spin-off to existing shareholders is another option, the Journal reported.

Like other big U.S. car makers, Chrysler has suffered from the public's steady migration toward smaller, more fuel-efficient cars.

The U.S. unit's weak performance was largely responsible for a 40% drop in DaimlerChrysler's fourth-quarter profit to 577 million euros ($749 million).

"The success of the sale process will probably turn on whether interested trade or private- equity partners see potential for faster operating improvement than flagged, and an easier task in cutting legacy/payroll costs than available to DaimlerChrysler itself," Citigroup's Lawson said in a note to clients.

Any sale or spin-off would likely take months, with the value of the division unclear.

Lawson suggested that health-care liabilities mean the company is valued anywhere between 2 billion euros and minus 3 billion euros.

Analysts at Morgan Stanley, however, valued Chrysler around 5 billion euros ($6.6 billion) after accounting for liabilities.

DaimlerChrysler has already announced a sweeping overhaul of the struggling division, with plans to cut 13,000, or around 16%, of its jobs over the next three years and to strip out around $4.5 billion in costs. See archived story.

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though analysts at Citigroup suggested investors might be happy with a "clean break" from the division, with no money changing hands but health-care liabilities passing to the new owner.

SOLD! I'll just charge all that to our provincial heathplan :lol:

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