Chrysler suitors rush to make bids

Blackstone could make offer as early as today; rest expected by Wednesday.

Bill Vlasic / The Detroit News

Three potential buyers for the Chrysler Group were said to be finalizing bids Thursday in hopes of getting the inside track on an acquisition of the U.S. division of DaimlerChrysler AG.

No formal bids had been received as of late Thursday, but people close to the process said offers are expected from private-equity giants Blackstone Group and Cerberus Capital Management as well as the Canadian auto supplier Magna International Inc.

Blackstone, which is teaming with Centerbridge Partners, was preparing to present its bid as soon as today, people familiar with the situation say.

All of the bids likely will be received by DaimlerChrysler's investment banker, J.P. Morgan Chase, before the German automaker convenes its annual shareholders meeting Wednesday in Berlin.

Then the competition for Chrysler will enter another, critical phase in which a leading candidate could be chosen by DaimlerChrysler for an exclusive negotiating period.

However, one buyout expert cautioned against expecting a Chrysler deal to be handled like a typical corporate acquisition.

"Anything can happen," said Stephen Kaplan, a finance professor at the University of Chicago Graduate School of Business. "They could pick an exclusive bidder, or send everybody back because the bids are too low."

The bidders themselves are taking different approaches to the historic opportunity of acquiring one of Detroit's Big Three automakers.

Blackstone portrays itself as the most successful firm in the private-equity arena and as a deep-pockets investor that has confidence in the turnaround skills of the current Chrysler management team.

The Cerberus approach has been more aggressive, and includes lining up a roster of outside advisers such as former Chrysler Chief Operating Officer Wolfgang Bernhard to invigorate the struggling automaker.

Magna, a top-notch supplier to Chrysler, is the wild card. Magna Chairman Frank Stronach has never hidden his ambitions to be a major player in the global auto industry. And waiting in the wings is General Motors Corp., which made its own offer for Chrysler in January and is poised to do a deal if the other bids fall short of DaimlerChrysler's expectations.

Analysts said DaimlerChrysler will need weeks, if not months, to sort through the complex challenge of selling Chrysler. "The due diligence for this sort of deal takes more than a few weeks," said Juergen Pieper, chief auto analyst at Metzler Bank in Frankfurt.

Teams from Blackstone, Cerberus and Magna have met with Chrysler executives in Auburn Hills, and outlined their plans for the U.S. automaker to DaimlerChrysler Chief Executive Dieter Zetsche.

Each has pledged to follow through with Chrysler's restructuring, which calls for eliminating 13,000 jobs and slashing production capacity by 2009, people close to the talks say.

But that's where the similarities end.

Officials at Blackstone and Centerbridge have privately voiced support of Chrysler CEO Tom LaSorda and his executive team. People close to the discussions said Blackstone prefers to install a hands-on board of directors to supervise a turnaround rather than shaking up management.

With more than 100 companies under its control, Blackstone cuts an imposing figure in the private-equity world. Its chairman, Stephen Schwarzman, was recently dubbed the "King of Wall Street" by Fortune magazine, and he is a tireless promoter of the benefits that private equity brings to troubled public companies.

If Blackstone is the cover boy of the private-equity world, Cerberus is the secretive emerging power that takes its name from the three-headed dog that guards the gates of hell in Greek mythology.

Cerberus CEO Stephen Feinberg may shun interviews, but his firm has made a huge impression on the U.S. auto industry. Since buying a 51 percent stake last year in GMAC, GM's financial services business, Cerberus has a led a bid to buy bankrupt Delphi Corp. and bought the assets of Tower Automotive Inc.

Cerberus is said to be keenly interested in getting Chrysler's finance arm and folding it into the former GM operation. To run Chrysler, Cerberus is looking to Bernhard, the hard-charging German who previously served as Chrysler's chief operating officer.

Bernhard's association is viewed by analysts as an advantage for Cerberus in the bidding process. "It would make sense that if he went (to Cerberus), it was for a good reason," said Pieper.

The entrance of Magna in the bidding has perplexed some industry insiders.

While the Canadian firm is viewed as a highly capable manufacturer of automotive systems, analysts wonder why Magna would mortgage its future to take on Chrysler.

"We're all kind of scratching our heads about Magna's involvement," said Dennis DesRosiers, an Ontario-based auto consultant. "I can see why they want Chrysler's assets, but its liabilities are huge."

A person close to Magna said the company expects to keep Chrysler intact rather than radically restructure its operations.

The source said that private-equity buyers might be inclined to break Chrysler up for sale at some point. "We're the guys who will keep the place a going concern," the person said.

If Magna succeeds in buying Chrysler, the company is expected to turn its management over to Mark Hogan, Magna's president and a former top GM executive.

The first round of bidding is expected to conclude before next week's annual meeting, people close to DaimlerChrysler say.

And while Zetsche has repeatedly said that "all options" are open regarding Chrysler, the automaker's executives and workers are expecting nothing less than a sale. "It's not a matter of if, but when and who," said one Chrysler official who asked not to be identified. "The market has spoken."

Detroit News Staff Writer David Shepardson contributed. You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com.