There was a lovely quote from Dieter Zetsche yesterday when he answered the questions of the investment analysts after the announcement of his financial results for last year.
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Adam Jonas of Morgan Stanley asked him why he did not flog off the truck business which was doing so well. That would create more than a jingle of loose change in the corporate coffers. Truck businesses are doing very well for demand, there has been a full round of rationalisation, those remaining are making good money and the threat of new entrants is not very high.
Jonas looked at the rising valuation of truck companies around the world and postulated that the DaimlerChrysler operations should be worth in the region of EUR30bn.
Now Dr Dieter, you may remember, is very keen on selling something. The wires had been hot all morning after his transparent comment that as group chief executive and one-time president of Chrysler he was looking into “strategic options with partners to find the best solution for both the Chrysler Group and DaimlerChrysler.” So certain were investors that he had found a solution that, when he said it, the shares flicked up by 5%.
It’s a bit unlikely, fellers. He’s got to do a deal with the union on pay by the autumn, and he has got to get the $US20bn of pension and healthcare liabilities sorted before that. Would anyone really take the hand of this bride while she still has such obvious disorders?
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By GlobalDataZetsche came back with a quick retort. “The valuation multiples (around 15 times currently) are very pleasant in the truck business. But it is much more pleasant to see the value in the group.
“If we sell everything that is profitable and everything that is unprofitable there would not be very much left.”
Most people think of BMW when they look at the Daimler dilemma with Chrysler. Though the scale is rather different the problem is the same. BMW was going to be dragged down if it stayed in MG Rover, and it would take a huge balance sheet hit if it got out. But it did get out and within the twinkling of an eye its wealth and health was restored.
There is the Ford favourite of package deals to examine: “How about if we give you Aston Martin, will you take Jaguar away for nothing? Aston Martin and Land-Rover then?” That might translate into: “We’ll give you Chrysler for free and throw in trucks.”
The only other remaining strategy after that is the last resort of the MG Rover receiver: “Hello. Is that Nanjing?”
There is a long, long way to go before Zetsche can mollify the long-standing Daimler shareholders for whom life was just fine before the transatlantic misadventure. Even with Daimler Benz car operating margins rocketing back up to 7%, the value of the group is still only EUR60bn – revived trucks notwithstanding. Before the merger it was 50% higher than that.
As Zetsche probably realises full well, if he sold everything profitable and everything unprofitable, he still won’t get back to the 1999 value.
Rob Golding
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