Chicago Tribune

CHICAGO – The story of Mitsubishi – a longtime automotive laggard striving to return to profitability in the United States – takes a new and uncertain twist now that its biggest shareholder is Goldman Sachs.

On Friday, the German-based auto company DaimlerChrysler sold its remaining 12.4 percent stake for an undisclosed sum to the New York investment house.

The sale isn’t expected to alter the immediate future for auto workers at Mitsubishi’s Normal, Ill., plant. But it does send a clear signal to Daimler’s outgoing chief executive officer.

“I don’t anticipate this will have any impact or mean any change in Mitsubishi’s operations at Normal or in its recovery plan,” said Dave Healy, an analyst with Burnham Securities. It “is simply changing ownership of some of its stock and putting it in other people’s hands.”

In fact, DaimlerChrysler and Mitsubishi say they will continue to develop new vehicles and engines together.

The Dodge Caliber that will replace the Dodge Neon at the Chrysler plant in Belvidere, Ill., next year was developed with Mitsubishi, as were the replacements for the Chrysler Sebring and Dodge Stratus coming in 2008. They will be assembled at Chrysler’s plant in Sterling Heights, Mich.

“Everyone needs someone else in order to cut development and tooling costs by spreading costs over a larger volume of vehicles,” said Joe Phillippi, principal with AutoTrends, an automotive consulting firm.

However, the move does signal a change from the strategy of Juergen Schrempp, DaimlerChrysler’s outgoing CEO. Schrempp is being forced to step down Dec. 31, two years before the end of his contract. He will be replaced by Dieter Zetsche, who has headed Chrysler Group in the United States since October 2000 and opposed bailing out the struggling Mitsubishi, which Schrempp supported.

“The sale of D/C’s interest in Mitsubishi means the nasty episode in Schrempp’s attempt to build a worldwide automotive empire is finally over,” Healy said.

Schrempp envisioned Daimler following the lead of General Motors and Ford by acquiring automakers to give it a foothold in Asia and more of a global presence.

But “Mitsubishi was in so much trouble and so deep in debt D/C had to keep bailing it out until a year ago when (D/C) management finally rebelled and refused to put up any more money,” Healy said.

Phillippi agreed. “It means Zetsche … has said D/C doesn’t need to tie up its money in a company that it never really could own.”

DaimlerChrysler sold its remaining interest in Mitsubishi for an undisclosed sum to Goldman Sachs, which hasn’t said what it intends to do. The firm didn’t return phone calls.

“The talk on the street is that it will sell the stock on the open market over time in drips and drabs in the hope of getting a little more than what they paid for it,” Healy said.

In 1985 Chrysler Corp. and Mitsubishi entered into a 50/50 joint venture to produce small cars at a plant in Normal. Chrysler sold that interest in 1991, though the plant continued to build cars for both automakers. Chrysler returned in 2000 to take a 34 percent equity stake in Mitsubishi and added another 3 percent in 2001 for that foothold in Asia. That was diluted to 24 percent when D/C refused to come to the aid of its troubled partner last year, and further reduced as Japanese investors put money into Mitsubishi.

Though there has been a manufacturing relationship between the automakers for 20 years, some wonder whether they will continue to develop products together.

“They’ll continue with ventures already in place, but I don’t see any new agreements in the future,” Healy said.

But Phillippi doesn’t see the relationship ending for years “because the pressure to cut costs through joint projects makes so much sense now.”

The sale means DaimlerChrysler has shed a liability while gaining some needed cash, or as one insider said, “it means we sold some stock and put a lot of money in our wallet that we now can spend on other things.”

DaimlerChrysler said the sale would boost its 2005 income by $588 million, money that will offset in part a $1.1 billion expense to cut 8,500 jobs at its Mercedes Car Group in Germany.

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(c) 2005, Chicago Tribune.

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AP-NY-11-11-05 1947EST

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