Chrysler Lunchtime Early Clips

(13)

-- Chrysler could reinstate dealers, Some to return to cut arbitration (Detroit Free Press)
-- Chrysler ponders reinstatements, Some terminated dealers expect to get letters detailing offer to skip arbitration, be reinstated (The Detroit News)
-- Updated: At least 12 rejected Chrysler dealers may be offered reinstatement (Automotive News)
-- Chrysler May Offer to Restore Some Outlets, Dealer Group Says (Bloomberg)
-- GM about to repay more of its loans (Detroit Free Press)
-- GM to make 2nd loan payment to U.S. (Automotive News)
-- Toyota incentives pull, Honda into price war (The Detroit News)
-- Arbitrator: Axle maker violated pact, UAW calls it major victory for workers (Detroit Free Press)
-- Questions linger as sale of Volvo nears, One is cooperation of 3 carmakers (Detroit Free Press)
-- Tata vouches for Nano safety after vehicle fire (The Detroit News)
-- Analyst views mixed on Renault-Nissan-Daimler tie-up (Automotive News, Reuters)
-- UPDATE 4-Renault-Nissan, Daimler to take mutual stakes-media (Reuters)
-- US DoJ plays European contract card (Financial Times)

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Detroit Free Press ( 03/26/2010 )
by GREG GARDNER

Chrysler could reinstate dealers, Some to return to cut arbitration

Chrysler may reinstate some of the 789 dealerships it terminated last June because the cost and time consumed in arbitrating nearly 400 cases would be a distraction to the company’s fragile turnaround, according to dealers and others familiar with Chrysler’s plan.

The company would not comment on the plan, but several former Chrysler dealers told the Free Press that Chrysler contacted them and other dealers telling them they would receive a letter of intent.

One person familiar with lobbying efforts of the rejected dealers said he had heard that about 96 dealers could be reinstated, but he asked not to be identified because new information was circulating among Chrysler dealers throughout the day Thursday.

General Motors sent letters of intent this month to 661 of 1,160 dealerships that it had planned to wind down. Those letters detail a process through which dealers could keep their Chevrolet, Cadillac or Buick-GMC franchises if they meet certain criteria over the next 60 days.

Chrysler terminated about 25% of its dealerships during a 41-day bankruptcy last May and June. The company cited statistics showing that the average Chrysler dealer sold fewer than 200 vehicles in 2008. Chrysler’s U.S. market share fell to 8.9% in 2009 from 11% in 2008. As a smaller company, Chrysler said it could not sell enough cars and trucks to support 3,200 dealers profitably.

In December, Congress passed and President Barack Obama signed a bill giving rejected GM and Chrysler dealers a chance to regain their stores through binding arbitration. Almost 400 Chrysler dealers asked for arbitration, according to a company spokeswoman.

As recently as January, Chrysler CEO Sergio Marchionne considered challenging the constitutionality of the new law. He later said Chrysler would abide by the process.

Chrysler hired two prestigious law firms to contest the arbitrations, which must be completed by June 14. The process has moved slowly, however, and the legal costs have mounted for dealers and Chrysler.

“I’ve heard the process has been far more frustrating for everyone,” said Chuck Eddy, a Youngstown, Ohio, Chrysler dealer who did not lose his store. “I don’t know how many they’re going to restore. I just hope they do it for some.”

(c) Copyright 2007, Detroit Free Press. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.


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The Detroit News ( 03/26/2010 )
by Alisa Priddle

Chrysler ponders reinstatements, Some terminated dealers expect to get letters detailing offer to skip arbitration, be reinstated

Some terminated Chrysler Group LLC dealers expect to receive, as early as today, letters outlining terms for reinstatement.

The letters are expected to be similar to those General Motors Co. sent to more than half of the 1,160 GM dealers it marked for termination, but are appealing through a federally approved arbitration process.

To be reinstated, dealers must meet Chrysler’s criteria: location, facilities, inventory financing and working capital.

A Chrysler spokeswoman said she could not comment on dealer reinstatement.

An offer by Chrysler to bypass the arbitration process for some of its terminated dealers is significant because the automaker has shown little willingness previously to compromise.

“So far, Chrysler has opted not to do the right thing at every turn,” said Alan Spitzer, CEO of Spitzer Management Inc. in Elyria, Ohio, whose seven Chrysler dealerships are among the 789 that were terminated in June.

While he doesn’t expect to get a reinstatement letter, Spitzer is among almost 400 Chrysler dealers who notified the American Arbitration Association that he wants his case heard.

Under legislation passed in December, arbitration hearings are to be completed in June. Hearing dates for some have been set.

As part of its bankruptcy restructuring, GM planned to close more than 2,000 dealerships by late this year, as it sheds four brands and shrinks its overall dealer network.

GM gave its dealers substantially more notice than Chrysler did, and its executives have appeared more open and conciliatory in efforts to resolve outstanding issues with dealers it targeted. Some dealers have been told by Chrysler to expect to receive letters of intent today, said Tammy Darvish of Silver Spring, Md., who lost two of her eight Chrysler franchises. Like Spitzer, she is on the Committee to Restore Dealer Rights but does not expect to receive a letter.

The reason some dealers and attorneys were contacted in advance is that Chrysler needed mailing addresses to send the packages in cases where the old businesses are no longer in operation, Darvish said.

Darvish said some who are expected to receive letters did not apply for arbitration. She speculated they could be in rural areas where the automaker has found it needs additional dealers.

Chuck Eddy, a dealer in Austintown, Ohio, and leader of the Chrysler Dealer Council, said he has heard talk of reinstatement letters, but has not been told officially of the reinstatements without arbitration.

He said some who are offered reinstatement may question whether the struggle to reopen is worth it.

Spitzer and Darvish say they do not see the letters as a softening of Chrysler’s stance, so much as the automaker recognizing it has 400 arbitration cases to ready in a short time.

“In reality, Chrysler probably looked at the tremendous number of arbitrations it is facing and is trying to reduce it down to size because they have a daunting task in front of them,” Spitzer said.

Darvish said the number receiving letters could range from 50 to fewer than 100, figures that were echoed by Spitzer.

In a concession last week, Chrysler agreed to stop giving dealerships additional brands to sell in areas where former dealers have filed for arbitration.

The automaker has been trying for years to get dealers to sell all brands. In areas where there were more than one dealer — each with only one or two brands — the strategy has been to close operations and award their franchises to the remaining local dealer.

Otherwise, Chrysler has been “completely nonresponsive all along and been ornery and difficult to work with,” Spitzer said of dealings with the committee and dealers.

“Chrysler has been the proverbial junkyard dog over this,” said Jack Fitzgerald, who had five Chrysler franchises terminated in the Washington, D.C., area.

(c) Copyright 2007, The Detroit News. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.


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Automotive News ( 03/25/2010 )
by Neil Roland

Updated: At least 12 rejected Chrysler dealers may be offered reinstatement

WASHINGTON -- At least 12 closed Chrysler Group dealerships were told by company representatives that they are to receive letters of intent beginning their reinstatement process, according to a leader of a rejected-dealers group.

Chrysler reinstatements would represent an about-face in company policy.

The company signaled as recently as two weeks ago that it had no plans to reinstate any of the 400 or so dealerships that have given notice of their intent to seek arbitration.

It isn't clear yet how many closed Chrysler dealerships have been told they are getting letters of intent and it's not clear how the process will work.

Chrysler on Wednesday declined to confirm that it was beginning reinstatements.

“Nothing new in our network has happened as of today,” the company said in an e-mail. “When/if we have something to announce, we will announce it. We do not have anything to announce today.”

Tammy Darvish: "They're running out of time in arbitration.”

Tamara Darvish, a co-leader of the Committee to Restore Dealer Rights, which has led lobbying on behalf of rejected Chrysler and General Motors Co. dealerships, said Wednesday she was e-mailed separately by three former Chrysler dealers.

The three dealers -- two from Florida and one from Ohio -- said they had been told by Chrysler representatives that they were to receive letters of intent via Federal Express. She said today she's now heard from more than a dozen dealers who say they've been told to expect a letter.

Running out of time?

“If I were a betting woman, I'd say Chrysler is doing this because they're running out of time in arbitration,” Darvish said in a phone interview. “How are they going to get all their cases covered?”

She added that pressure from Rep. Chris Van Hollen, the sixth-ranking House member, may also have figured into Chrysler's plans.

Van Hollen, D-Md., called on Chrysler earlier this month to follow GM's lead and reinstate rejected dealerships.

Leonard Bellavia, a Mineola, N.Y., lawyer, said one of his clients also was notified today by a Chrysler representative that he was to receive a letter of intent later this week.

Bellavia declined to identify the state in which his client does business, except to say it isn't Florida or Ohio.

“It makes sense for Chrysler to settle now as opposed to later when all they will have done is incur greater expenses,” Bellavia said. “They're likely to pick dealers who have strong cases and whose markets are under-dealered.”

Earlier this month, GM said it plans to reinstate 661 of the 1,160 rejected dealerships that have filed for arbitration.

GM reinstatements continue

GM has mailed nearly all of its letters of intent, which list requirements that dealers are expected to meet -- including facility size, location, capital and floorplan financing.

GM is giving dealers 10 days to sign and mail them, and then 60 days to provide documentation.

Under a new federal law, arbitrations must be completed by June 14, though they can be extended a month at an arbitrator's discretion.

Fewer than 400 of the 789 Chrysler dealerships that were closed last spring as part of the company's bankruptcy have filed for arbitration, Chrysler said recently.

Chrysler signaled earlier this month that reinstatements didn't figure into its plans.

“Dealer appointments will be a function of the arbitrations,” Chrysler said in a March 8 e-mail. “The company looks forward to the expeditious completion of the arbitration process.”

Read more: http://www.autonews.com/article/20100325/RETAIL07/100329941/1400#ixzz0jHC318C0

Copyright (C) 2007 Crain Communications, Inc. All rights reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved. 


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Bloomberg ( 03/25/2010 )
by Mike Ramsey

Chrysler May Offer to Restore Some Outlets, Dealer Group Says

Chrysler Group LLC, the U.S. automaker run by Fiat SpA, may offer reinstatement to some of its terminated dealers, said Tammy Darvish, the co-chairwoman of a dealership organization lobbying for the restoration.

Fifteen to 20 dealers contacted Darvish in the past day telling her that Chrysler officials had called to say offers would be sent to reinstate franchises, said Darvish, a leader of the Committee to Restore Dealer Rights.

The offer of reinstatement would follow a General Motors Co. decision this month to bring back 661 dealers that it had planned to cut. Both companies are facing U.S.-ordered binding arbitration cases with dealers that ask for an appeal.

Chrysler terminated 789 dealers last year in its bankruptcy. President Barack Obama signed a law in December allowing terminated dealers to be granted binding arbitration to seek to have their dealership restored. Chrysler said in January 409 dealers had applied for arbitration.

A Chrysler spokesman declined to comment.

The Detroit Free Press reported earlier that as many as 96 dealers may be reinstated, citing unnamed sources with knowledge of the situation.

Darvish, a principal of Darcars Automotive Group in Silver Spring, Maryland, had two Chrysler dealerships terminated. She wasn’t contacted by the company, she said.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=afWGjfe_TUg0

©2007 Bloomberg L.P.


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Detroit Free Press ( 03/26/2010 )
by Tim Higgins

GM about to repay more of its loans

General Motors plans to make another round of $1.19billion loan payments to the U.S. and Canadian governments on Wednesday, the company said Thursday.

Last December, the Detroit automaker made similar payments as part of its efforts to pay off the $6.7-billion U.S. and $1.4-billion Canadian government loans.

“Given the progress the company is making, GM has every confidence that the remainder of the loans will be paid in full by June 2010, five years ahead of schedule,” GM Chairman and CEO Ed Whitacre said in a statement.

Paying off the loans is only the first step for taxpayers to get their money back from helping GM stay afloat last year. The next step will be launching GM as a public company again.

GM is expected to release its fourth-quarter 2009 financial results soon.

On Thursday, industry analyst Eric Selle of J.P. Morgan Chase estimated in a note to investors that GM could post $2 billion in earnings before interest, taxes, depreciation and amortization for the fourth quarter.

He also said GM’s enterprise value in 2011 could be $67 billion.

GM Chief Financial Officer Chris Liddell said this month it’s possible that GM could launch a public offering later this year if several factors were in place, such as an improved economy. He also said there’s a reasonable chance GM could be profitable this year.

(c) Copyright 2007, Detroit Free Press. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.


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Automotive News ( 03/26/2010 )
by Chrissie Thompson

GM to make 2nd loan payment to U.S.

DETROIT -- General Motors Co. said it will make its second loan payment to the U.S. and Canadian governments on March 31 and reaffirmed a plan to pay back its loans by mid-year.

The automaker will shell out $1 billion to the U.S. Treasury on the way to paying back $6.7 billion. At the same time, GM will put $192 million toward paying off its Canadian loan, worth $1.4 billion U.S. The first payments, also at those amounts, were made in December.

“GM has every confidence that the remainder of the loans will be paid in full by June 2010, five years ahead of schedule,” CEO Ed Whitacre said today in a statement.

GM was not required to make any payments on the loans before they matured in July 2015.

The repayment will come from leftover funds set aside by the Obama administration to finance GM's fast-track sale out of bankruptcy in July.

After the loan repayment, the U.S. government will still have a 61 percent equity stake in GM. The government is hoping to sell GM stock to recoup the $50 billion it gave GM to fund its restructuring.

Executives have said GM's initial public offering could come as early as this year.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100325/OEM/100329924/1179#ixzz0jHLnYkUR

Copyright (C) 2007 Crain Communications, Inc. All rights reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved. 


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The Detroit News ( 03/26/2010 )
by CHRISTINE TIERNEY

Toyota incentives pull, Honda into price war

Honda Motor Co. has been one of the most disciplined automakers when it comes to sales practices, steering clear of splashy deals and incentives that can erode brands and profits.

But Honda is being pulled into a price war now by its archrival, Toyota Motor Corp.

The two Japanese automakers are fiercely competitive, tending to fight over the same customers. After Toyota raised incentives recently to counter bad publicity over big recalls, analysts said Honda was bound to respond.

Honda’s discounts are still below the industry average of around $2,700 per vehicle, but in the first two months of 2010, they rose nearly 30 percent to $1,641, according to Autodata Corp.

Forecasting firm True Car predicts Honda’s incentives will reach $1,929 this month, up 8.3 percent from last March. It estimates the industry average will be around $2,800, and Toyota’s incentives at $2,318 per vehicle.

In comparison with its rivals, Honda seems restrained. But its incentives are high for the company, which normally shuns sales tactics that erode the residual value of vehicles and brands.

It’s now offering deals, such as no-money-down lease plans with no deposit required on models such as its flagship Accord.

“This Honda program snuck in very quietly,” said James Bell, analyst at used car pricing specialist Kelley Blue Book. “Their huge new lease program is proof that Toyota’s recent flood of incentives might just be impacting Honda as well.”

Honda said it had increased its incentives, but not dramatically.

“It’s probably a little bit higher than it has been in the past few years,” said company spokesman Chuck Schifsky. But he said last year’s discounts were low. Demand for small cars was high, and Honda was short of supplies. Art Spinella, president of CNW Research of Bandon, Ore., says he thinks the rise in Toyota and Honda incentives is less dramatic than it appears.

The two automakers have always provided cash quietly to dealers to help them close deals. They’re taking some of that cash and making it more visible to draw customers into showrooms. “They’ve never needed to drive floor traffic before,” Spinella said. But “Honda’s incentives aren’t up very much at all,” he said.

True Car analyst Jesse Toprak agrees. “Their spending is up, but not as much as it appears,” he said. “It’s very well calculated.”

(c) Copyright 2007, The Detroit News. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.


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Detroit Free Press ( 03/26/2010 )
by JEWEL GOPWANI

Arbitrator: Axle maker violated pact, UAW calls it major victory for workers

An arbitrator has ruled that American Axle & Manufacturing violated its contract with the UAW last fall when the company moved most of its axle production out of its Detroit plant to Mexico, according to the UAW.

The Detroit-based auto supplier had not commented by early Thursday evening.

Citing the violation of jobsecurity clauses, the UAW said American Axle will have to “make whole” workers whose work was outsourced. That could mean American Axle would have to pay back wages and benefits or recall workers from layoff.

“This is a major victory for these workers, and we’re very gratified that the umpire upheld our strong outsourcing language reached in the 2008 agreements,” UAW President Ron Gettelfinger said in a statement Thursday. “Our American Axle members went on strike for three months in part to win this measure of job security.”

The 2008 labor contract was reached after a bitter three-month strike among more than 3,600 UAW-represented workers at five American Axle plants.

Workers protested wage cuts of about $10 an hour and benefit reductions but ultimately ratified a deal that made those cuts, fewer vacation days, shorter breaks and eliminated about 2,000 hourly jobs at the auto supplier.

Less than a year later, the supplier sought additional concessions from its workforce at its sprawling plant that straddles Detroit and Hamtramck to meet an even-lower cost structure that workers at the company’s plant in Three Rivers, near Kalamazoo, had adopted.

When no concessions were reached by the summer, the company decided to move a large portion of its axle work from Detroit to its plant in Guanajuato, Mexico.

The UAW said the next move is for the UAW and American Axle to determine how many workers were affected by the outsourcing of work and how much those workers lost in wages and benefits, according to the union.

In other American Axle news, the company said Thursday that it has opened a new plant in Lancaster, Pa., near Philadelphia to make axles for commercial trucks.

(c) Copyright 2007, Detroit Free Press. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.


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Detroit Free Press ( 03/26/2010 )
by BRENT SNAVELY

Questions linger as sale of Volvo nears, One is cooperation of 3 carmakers

With just days left before Ford-owned Volvo’s likely sale to Chinese automaker Geely, big questions remain about the deal: How closely will the three companies work together in the future and for how long?

Ford, which acquired Volvo in 1999 for $6.4 billion, is expected to reach an agreement to sell Volvo as early as this weekend, according to a person familiar with the process, and arrangements are being made for an announcement in Sweden.

The Free Press has previously reported that the sale could be for about $1.8 billion.

Ford spokesman Mark Truby would only say that Ford still expects to meet its previ­sider ously announced Wednesday deadline.

But even after the deal is signed, it is likely that Ford, Volvo and Geely will continue to work together for several years, said Michael Robinet, vice president of global vehicle forecasting for CSM. Ford and Volvo cars share common parts, assembly processes and technology, Robinet said. “Selling an integrated car division … is like selling a room in your house. It is very connected and not easily separated,” he said.

UBS Investment analyst Colin Langan noted that Ford sold Jaguar and Land Rover in 2008, but said unwinding Volvo will be more challenging. “Chinese automakers do not have some of the advanced technologies the automakers in developed markets have,” he said.

Ford first said it would conselling Volvo in December 2008 and named Zhejiang Geely Holding Group as its preferred bidder last fall.

In November, Ford reached a deal with Geely on the terms of Volvo’s intellectual property but said final details still needed to be worked out.

Ford has lost millions on Volvo since acquiring the Swedish automaker and reported a pretax loss of $653 million on the brand in 2009.

Tim Dunne, director of global automotive coordina­tion for J.D. Power and Associates, said selling Volvo will al­low Ford to devote more resources to its core Ford, Lincoln and Mercury brands.

“It is less money than what they paid for it, but it’s good money, and … Volvo will no longer be diverting their attention.”

(c) Copyright 2007, Detroit Free Press. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.


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The Detroit News ( 03/26/2010 )


Tata vouches for Nano safety after vehicle fire

Mumbai, India — When it was launched less than a year ago, the $2,500 Tata Nano was promoted as a safe, ultra-cheap car for poor Indians, an alternative to the motorbikes that zoom precariously around the country. New questions about the safety of the pint-sized auto are being raised after one burst into flames Sunday as it was being driven home from the showroom.

Tata Motors spokesman Debasis Ray said the company is investigating the cause of the fire. Ray said the automaker believed it was “a one-off, stray incident.”

(c) Copyright 2007, The Detroit News. All Rights Reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.


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Automotive News, Reuters ( 03/26/2010 )


Analyst views mixed on Renault-Nissan-Daimler tie-up

TOKYO -- Analysts say a tie-up of partners Renault SA and Nissan Motor Co. with Daimler could be positive but warned against unchecked optimism.

"It could set the stage for the expanded supply of electric vehicles or batteries (by Nissan) to Daimler," JPMorgan Securities analyst Kohei Takahashi wrote in a note.

"However, given the failure of numerous past alliances and mergers to meet their stated targets, we caution against excessive expectations for sharp cost reductions through parts sharing until more details become available," he added.

Said Hiroaki Osakabe, a fund manager at Chibagin Asset Management: "I personally think there aren't a lot of merits for Nissan. Just about the only merit I can see is that it might help make parts procurement less expensive, and maybe open some routes into Europe. But overall the gains for Nissan look rather small."

The three automakers are reportedly in the final stages of talks to obtain symbolic stakes in each other as they look to share technology amid intensifying competition.

Symbolic stake

The Nikkei business daily reported on Friday that Nissan, which is Japan's third-biggest automaker and is held 44.3 percent by Renault, was set to take a stake of 1 percent to 2 percent in Daimler. Negotiators are considering stock swaps or other arrangements that limit the need to raise fresh funds, it said.

The report came a day after the Financial Times said Renault and Daimler were close to agreeing on a wide-ranging strategic partnership that would include a swap of small stakes between them. The paper quoted one unidentified person as saying the "symbolic" stake could be about 3 percent.

Le Figaro newspaper reported on Friday that Renault's board will meet on April 6 to discuss the partnership with Daimler, adding that the deal would be announced to shareholders at the carmakers' annual meetings later in April.

Renault-Nissan CEO Carlos Ghosn has repeatedly said he is open to a third partner for the 11-year-old Franco-Japanese alliance, and that an equity relationship was meaningful to ensure a level of commitment and trust.

Carmakers are on the hunt to cut costs by building scale and spreading the load of heavy investments in new technologies such as hybrid and electric vehicles over large numbers of cars.

All three companies declined to confirm the reports.

Renault and Daimler, the maker of Mercedes-Benz and Smart brand cars, have made no secret of being in talks about cooperating to cut costs, pool technology resources and build scale as the crisis-hit industry tries to become more efficient. Both companies have said they were talking with a wide range of makers.

Marriage vs. engagement

Analysts also said a deal could fall through, with many citing widespread views that Renault-Nissan's Ghosn was pushing for the equity deal, which his Daimler counterpart, CEO Dieter Zetsche, does not favor.

"He's (Ghosn) not into living together, he's into getting married. And maybe Daimler is interested in only getting engaged," said CLSA Asia-Pacific Markets analyst Christopher Richter. He added that operationally there could be advantages on both sides, with Nissan-Renault possibly supply electric vehicle technology and Daimler providing big diesel engines.

"One nice thing with this alliance is that nobody would be stepping on anybody's toes," he said, adding that Mercedes buyers were unlikely to have Renault or Nissan cars on their shopping list and vice-versa.

The auto industry is replete with capital alliances that have floundered or are yielding few or no synergies. Daimler itself has had numerous failures, with Chrysler, Mitsubishi Motors Corp. and Hyundai Motor Co.

Mitsubishi ended months of speculation earlier in March by announcing with France's PSA/Peugeot-Citroen that the two had decided to forego an equity tie-up for now.

Small equity holdings within the industry are also not uncommon: Suzuki Motor Corp. and Subaru-maker Fuji Heavy Industries Ltd. hold a few percent in each other, while Toyota Motor Corp. owns 4 percent of Yamaha Motor Co.

Read more: http://www.autonews.com/article/20100326/ANE/303269998#ixzz0jHKJOpB7

Copyright (C) 2007 Crain Communications, Inc. All rights reserved.
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved. 


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Reuters ( 03/26/2010 )
by Chang-Ran Kim

UPDATE 4-Renault-Nissan, Daimler to take mutual stakes-media

TOKYO - Partners Renault SA and Nissan Motor Co are reportedly in the final stages of talks with Daimler AG to obtain symbolic stakes in each other as they look to share technology amid intensifying competition.

The Nikkei business daily reported on Friday that Nissan, which is Japan's third-biggest automaker and is held 44.3 percent by Renault, was set to take a stake of 1 to 2 percent in Daimler. Negotiators are considering stock swaps or other arrangements that limit the need to raise fresh funds, it said.

All three declined to confirm the reports, which came a day after the FT said Renault and Daimler were close to agreeing a strategic partnership that would include a swap of small stakes.

The paper quoted one unidentified person as saying the "symbolic" stake could be around 3 percent.

Renault-Nissan chief Carlos Ghosn has said he is open to a third partner for the 11-year-old alliance.

Renault's board will meet on April 6 to discuss the partnership with Daimler, Le Figaro newspaper reported on Friday, adding that the deal would be announced to shareholders at the carmakers' annual meetings later in April.

Carmakers are on the hunt to cut costs by building scale and spreading the load of heavy investments in new technologies such as hybrid and electric vehicles over large numbers of cars.

Renault and Daimler, maker of Mercedes cars, have made no secret of being in talks about cooperating to cut costs, pool technology resources and build scale as the crisis-hit industry tries to become more efficient. Both companies have said they were talking with a wide range of makers.

Analysts said a partnership among the three to seek operational synergies could be positive.

"It could set the stage for the expanded supply of electric vehicles or batteries (by Nissan) to Daimler," JPMorgan Securities analyst Kohei Takahashi wrote in a note.

"However, given the failure of numerous past alliances and mergers to meet their stated targets, we caution against excessive expectations for sharp cost reductions through parts sharing until more details become available," he added.

SMALL GAINS

Nissan shares rose 0.9 percent to 775 yen by early afternoon, roughly in ine with Tokyo's transport sector index .ITEQP.T.

"I personally think there aren't a lot of merits for Nissan," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.

"Just about the only merit I can see is that it might help make parts procurement less expensive and maybe open some routes into Europe. But overall the gains for Nissan look rather small, and I think the stock price is reflecting this view."

Analysts also said a deal could fall through, with many citing widespread views that Renault-Nissan's Ghosn was pushing for the equity deal.

"He's (Ghosn) not into living together, he's into getting married. And maybe Daimler is interested in only getting engaged," said CLSA Asia-Pacific Markets analyst Christopher Richter. He added that operationally there could be advantages on both sides, with Nissan-Renault possibly supplying electric vehicle technology and Daimler providing big diesel engines.

"One nice thing with this alliance is that nobody would be stepping on anybody's toes," Richter said.

The auto industry is replete with capital alliances that have floundered or are yielding few or no synergies. Daimler itself has had numerous failures, with Chrysler, Mitsubishi Motors and Hyundai Motor .

Mitsubishi ended months of speculation earlier in March by announcing with France's PSA Peugeot Citroen that the two had decided to forego an equity tie-up for now.

Small equity holdings within the industry are also not uncommon: Suzuki Motor and Subaru-maker Fuji Heavy Industries hold a few percent in each other, while Toyota Motor owns 4 percent of Yamaha Motor.

Meanwhile, carmakers have also aggressively sought operational tie-ups without an equity relationship.

Sources have said Japan's Mazda Motor is discussing the possibility of asking Toyota for help in hybrids, though Ford Motor is Mazda's top shareholder with 11 percent.

The Nikkei reported on Friday that Mazda planned to introduce a mid-size hybrid vehicle by 2013 based on core components supplied by Toyota.

http://www.reuters.com/article/idUSSGE62O0IQ20100326

(c) 2007 Reuters Limited
© 2007 Dow Jones Reuters Business Interactive LLC (trading as Factiva). All rights reserved.


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Financial Times ( 03/26/2010 )
by Stephanie Kirchgaessner

US DoJ plays European contract card

Daimler, the German carmaker, this week agreed to pay $185m in civil and criminal fines under the terms of a deferred prosecution agreement with US prosecutors following allegations that it engaged for years in an elaborate bribery scheme in 22 countries.

The US Department of Justice considers fighting bribery one of its top law enforcement priorities, and the Daimler case was the latest in a string of corporate settlements that underlined how aggressively prosecutors are pursuing such cases.

But a close look at hundreds of pages of court records show that the maker of Mercedes-Benz was never formally charged with paying bribes, though two of its subsidiaries were.

Instead, it was charged with conspiracy to commit bribery – an allegation that is usually reserved for defendants who plan, but do not execute, crimes – and a violation of “books and records provisions” of a US anti-bribery law.

German scandals trigger a change in attitude towards corruption

Daimler and Ferrostaal this week became the latest in a series of German companies to be embroiled in bribery scandals, Daniel Schäfer reports from Frankfurt.

The cases have again put the spotlight on a country where bribes have long been regarded as a normal part of the business culture.

Daimler is set to pay $185m to settle allegations by the US justice department. Munich prosecutors this week raided the Essen-based office of Ferrostaal, an industrial services group majority-owned by an Abu Dhabi-based investor.

Prosecutors are investigating several Ferrostaal managers and have detained one of them, said Barbara Stockinger, spokeswoman for the prosecutor.

A Ferrostaal spokesman said the group would co-operate closely with prosecutors, adding that the investigations were not directed against the company itself.

Ferrostaal is a former subsidiary of MAN, the German truck and engineering group that is also entangled in a large-scale bribery scandal that led to the departure of several management board members and ongoing investigations against about 100 suspects.

An even bigger bribery scandal at fellow Munich-based engineering company Siemens led to a €1bn ($1.3bn) fine paid to US and German authorities in 2008.

Foreign bribes were even tax-deductible as recently as a decade ago.

But the impression that the payment of bribes is normal business practice for German companies is probably out of date.

The Siemens scandal shocked German boardrooms and triggered a fundamental change in the attitude towards corruption.

“Siemens has woken up corporate Germany. Ever since the scandal erupted, compliance has gained enormous attention in the boardrooms of both large co-operations and Mittelstand companies,” said Wendelin Acker, a partner at Lovells.

Having entered into a “deferred prosecution agreement”, Daimler did not plead guilty to any charges, including the lesser conspiracy charge.

The technicalities might seem inconsequential.

But the small print of the European Union’s public procurement rules forbids any company from receiving an EU contract if it has been found guilty or convicted of bribery.

Thus the DoJ’s decision not to formally charge Daimler with bribery, in effect, radically reduced any risk that the company would be shut out from European government contracts were it to have been convicted of such a charge.

The case is not an anomaly. Last month, BAE Systems, the British defence group, paid $400m in fines to the DoJ after prosecutors alleged in court documents that it doled out millions of dollars in improper payments to foreign government officials.

But BAE, which did not dispute the description of its conduct, was charged and pleaded guilty to allegations that it made false statements about its anti-bribery compliance programme. The DoJ’s case against Siemens in 2008, in which the German conglomerate paid $800m in US penalties, similarly centred on “books and records” violations.

There are several reasons why the justice department might not bring criminal bribery charges against a company even if it has clear evidence of corrupt acts. In some cases, it might lack evidence that a company had criminal intent.

Under US law, however, the DoJ must also consider the “collateral consequences” of such charges. Indeed, legal experts say the recent string of big US bribery cases emphasises the significant impact EU “debarment” policies – which regulate when a corporation must be barred from competing for government contracts – have had on the DoJ’s ability to negotiate settlements with companies.

“We’re seeing severely contorted settlement agreements to avoid pleading guilty to conduct that would result in automatic debarment,” says Alexandra Wrage, the president of Trace, a non-profit organisation that specialises in corporate anti-bribery compliance programmes.

Companies with deep pockets can afford steep penalties. But the severe consequences they face in Europe and sometimes the US if they are found guilty of actual bribery might be insurmountable, giving the DoJ a strong hand in negotiations.

US corporate attorneys who work on bribery cases say the DoJ never explicitly threatens that companies ought to settle lesser allegations in order to avoid bribery charges.

But they acknowledge that the risks associated with a bribery conviction can hang over negotiations with prosecutors like a dark cloud.

The DoJ does not always shy away from directly bringing bribery cases. Subsidiaries of Siemens and others have been faced with substantive bribery charges.

“While I can’t comment on any specific case or charging decision, I can say that we follow the facts, available evidence and the law where it leads,” a spokeswoman for the justice department said.

(C) The Financial Times Limited 2007.
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