Thursday, March 22, 2007

Daimler pitches continued alliance after Chrysler sold

As discussed a few weeks ago when DaimlerChrysler first revealed the option to sell Chrysler to another investor, untangling the connections between the Mercedes and Chrysler operating units poses a challenge for buyer and seller. Perhaps to reassure investors, and get a better price for their asset, Daimler yesterday announced (as reported in the Wall Street Journal) that it would be willing to continue many aspects of the cooperation between Mercedes and Chrysler.

Daimler's offer of joint purchasing, component sharing, etc., after a divestment is more appealing to a private-equity buyer than another car company, which might have strategic and competitive reasons for limiting such sharing (as might Daimler).

Splitting operating siblings who are in the same business is the corporate equivalent of separating conjoined twins. After years of union, each has grown to rely on systems and processes provided by the other twin. When the units are separated, those systems must be recreated. Daimler's offer to continue important partnerships allows the weaker twin (i.e., Chrysler) to continue to benefit from the stronger twin's systems, as well as save expenses, even if they aren't formally connected anymore.

(Photo still from the movie "Stuck On You")

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