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Sports-car business sale could bring $100 million to financially strapped automaker
By Bill Koenig
and Mike Ramsey
Bloomberg News
Published on Thursday, Aug 28, 2008
Chrysler LLC, now studying a sale of its Viper sports-car business, is following General Motors and Ford in looking to shed specialty vehicles and focus on main brands.
In the past two years, Ford sold off its British-based luxury car divisions. GM is considering a sale of its Hummer line of sport utility vehicles based on military trucks. Chrysler said Wednesday it hired Lazard Ltd. to help in a review of options for the 600-horsepower, 10-cylinder Viper.
''When times are tough, you retreat to the core businesses,'' said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.
The three U.S.-based automakers are scaling back as they are losing money, sales and market share in their home country. GM hasn't posted an annual profit since 2004, and Ford hasn't since 2005. Daimler AG sold Chrysler to Cerberus Capital Management LP a year ago because of losses.
Sales declines of 23 percent at Chrysler, 18 percent at GM and 14 percent at Ford this year through July trimmed market share for their U.S. brands to 47 percent, from 51 percent
a year earlier, according to the research firm Autodata Corp.
With losses and shrinking U.S. sales, the automakers might balk at putting more money into relatively low-volume vehicles such as Chrysler's Viper, which accounted for just 682 of the company's 965,935 U.S. deliveries through July, or GM's Hummer, which generated 18,035 of GM's 1.82 million total.
''You don't have enough money to fund everything,'' said Stephanie Brinley, a Southfield, Mich.-based analyst for AutoPacific Inc.
Ford Chief Executive Officer Alan Mulally sold Aston Martin for $931 million in 2007 to a group led by British auto-racing champion David Richards, and Jaguar and Land Rover for $2.4 billion in June to India's Tata Motors Ltd.
Mulally has said his top priority is getting his company's regional units to work more closely together, a strategy he calls ''One Ford.'' Ford has kept one European luxury brand, Sweden-based Volvo.
Neither GM nor Ford has forecast when losses will end. Ford posted an $8.7 billion deficit in the second quarter, the worst quarterly deficit in its 105 years. GM's $15.5 billion loss during the period was third worst in its 100-year history.
Chrysler is closely held and doesn't release detailed financial information on a regular basis. The automaker said on Aug. 1 that it earned $1.1 billion in this year's first half, excluding interest, taxes, depreciation, amortization and restructuring costs.
Chrysler is expected to use up $2.5 billion in cash during 2008, a person familiar with its finances said in May. Chrysler said it had $11.7 billion in cash and marketable securities at the end of June.
CEO Bob Nardelli said Wednesday in a statement that Chrysler has been ''approached by third parties who are interested in exploring future possibilities for Viper,'' without identifying them. The company said it doesn't have a timetable for deciding.
''My bet will be they will definitely be able to unload it,'' for a price of ''maybe $100 million,'' said James Gillette, an automotive consultant at CSM Worldwide Inc. in Grand Rapids, Mich., who does asset valuations for customers.
Chrysler's announcement comes as it rebuilds sales of the sports car, which is its most expensive vehicle, with prices starting at $88,125. U.S. sales of the Viper more than doubled this year through July, already exceeding the 435 sold in all of 2007. Annual sales reached 2,103 in 2003.
Chrysler LLC, now studying a sale of its Viper sports-car business, is following General Motors and Ford in looking to shed specialty vehicles and focus on main brands.
Get the full article here.
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