USA: Lawyers fire opening salvoes in Kerkorian v DaimlerChrysler merger lawsuit hearing - report

By just-auto.com editorial team | 2 December 2003

Lawyers for Kirk Kerkorian claimed the investor was duped out of billions of dollars in the merger of DaimlerChrysler AG, but the car company responded that Kerkorian supported the deal and grew disgruntled only when his shares lost value.

According to Associated Press (AP), the claims were made on Monday at the start of a two-week trial in US District Court. Kerkorian is suing DaimlerChrysler for more than $1 billion in compensatory damages and also is asking Judge Joseph Farnan to award punitive damages, the report added.

Kerkorian's lawyer Terry Christensen said Daimler-Benz officials secretly organised a "massive and well-planned" takeover of Chrysler, all the while claiming the companies were being joined in a "merger of equals," AP said.

As a result, Christensen reportedly said, they avoided paying Kerkorian an acquisition fee of up to 62% on his shares when the companies merged. Kerkorian owned 14% of Chrysler's shares at the time of the merger, making him the company's primary shareholder, Associated Press said.

"They took control and they didn't pay for it," Christensen said, according to the report.

AP said that Christensen pointed to the fact that no American has been named to DaimlerChrysler's management board since the 1998 merger - he added that the board, which controls many operations but doesn't hire or fire executives, will have 11 German members and one American member in January 2004 and the American was on the board prior to the merger.

According to the report, Christensen also played excerpts from a 2000 interview by the London-based Financial Times newspaper with DaimlerChrysler chairman Jurgen Schrempp in which Schrempp describes Chrysler as a "division" of Daimler and said the German-heavy management "was always the structure I wanted."

DaimlerChrysler attorney Jonathan Lerner responded that Schrempp was trying to brush aside questions about Chrysler's poor performance in the interview and hired Germans to fill Chrysler jobs for the same reason, according to the AP report.

"He needed the company to succeed because the buck would stop with him," Lerner reportedly said.

AP said that Lerner repeatedly asked why Kerkorian failed to question the merger for years even though details were well publicised.

Lerner reportedly said Kerkorian made $2.7 billion because of the merger and claimed Kerkorian was "salivating" at the prospect of the deal, since he had been warned that Chrysler was losing money because of incentives, costs and shrinking international sales.

Lerner also argued that DaimlerChrysler's supervisory board, which does have the power to hire and fire executives, has five German and five American members, AP said.

"No matter now many times, no matter how many ways Mr. Christensen says it, there was no fraud in this case," Lerner said, according to the AP report.

The news agency noted that Kerkorian didn't attend the opening statements but was expected to testify Tuesday morning. Former Chrysler chairman Robert Eaton and Schrempp also are scheduled to take the stand later in the trial.

According to Associated Press, Christensen said after the hearing that Kerkorian is still open to a settlement with DaimlerChrysler, which paid $3 million in August to settle similar claims from other investors. DaimlerChrysler said that suit was groundless but it settled to avoid a jury trial. In this trial, there is no jury and Farnan will decide the case, AP added.