Mad2, there is perhaps much money coming from germany... read:
Suit Accuses DaimlerChrysler of Lies
A $9 Billion Lawsuit Filed Against DaimlerChrysler AG Accuses the Company of Lying To Chrysler Shareholders About the 1998 Merger
By JUSTIN HYDE
AP Auto Writer
DETROIT (AP) -- Billionaire investor Kirk Kerkorian filed a $9 billion lawsuit Monday against DaimlerChrysler AG [NYSE:DAJ - news], accusing chairman Juergen Schrempp of falsely telling Chrysler shareholders that the 1998 combination with Daimler-Benz was a ``merger of equals.''
The suit, filed in Delaware by the Kerkorian-owned Tracinda Corp., is the latest trouble to beset the once-vaunted merger between the two auto manufacturers, one of the biggest industrial combinations in history.
Since the November 1998 deal, several top Chrysler officials have quit or been fired and the stock has plunged nearly 55 percent from its post-merger high set in early 1999.
The Los Angeles-based Tracinda, which Kerkorian uses to control his investments, said in a statement that it is seeking to unwind the $34 billion deal. It claims that it would have never voted for the merger if it had been presented as a takeover of Chrysler by the Stuttgart, Germany-based company.
Kerkorian, who launched a hostile takeover bid for the Auburn Hills-based Chrysler in 1995 that led to a seat on Chrysler's board, is DaimlerChrysler's third-largest individual shareholder with about 4 percent of its shares. At the time of the merger, he was Chrysler's largest shareholder with 13.75 percent of its shares.
``To close one of the largest transactions in the history of the automotive industry, defendants Daimler-Benz AG and DaimlerChrysler AG blatantly lied to all concerned in a scheme masterminded by defendant Juergen Schrempp,'' the complaint said.
In a statement, DaimlerChrysler AG said the allegations ``appear to be completely without merit,'' but said it had not yet seen the lawsuit and declined further comment.
Tracinda cited comments Schrempp made recently to the Financial Times that the then-chairman of Daimler-Benz never intended DaimlerChrysler to be a merger of equals, but instead secretly planned to make Chrysler a division of the German parent company.
``Defendants always intended to relegate Chrysler to the status of a division, always intended to fire Chrysler's management and always intended to replace them with executives from their headquarters in Stuttgart,'' Kerkorian's complaint said.
``Mr. Schrempp knew that Chrysler's directors and shareholders would never approve a transaction if he told the truth, namely, that a foreign corporation was seeking to acquire complete operating control of one of America's 'Big Three.'''
Analyst David Healy with Burnham Securities said, however, there were clear signs that the deal was not a merger of equals when both boards approved it. The majority of shareholders were German, and Eaton promised to give up his title as co-chairman within three years.
``Kerkorian was an enthusiastic supporter'' of those terms, Healy said. ``To me, it was never a merger of equals.''
In an Oct. 30 Financial Times interview, Schrempp is quoted as saying there was no need to keep pretending that the deal was designed as a merger of equals.
``The structure we have now with Chrysler (as a division) was always the structure I wanted,'' he said. ``We had to go a roundabout way but it had to be done for psychological reasons. If I had gone and said Chrysler would be a division, everybody on their side would have said: 'There is no way we'll do a deal.'''
Kerkorian is seeking more than $2 billion in actual damages, $1 billion in damages for the drop in value of the DaimlerChrysler shares since the merger and punitive damages of at least $6 billion. Tracinda also said it ``seeks to unwind the transaction so that Chrysler will once again be an independent corporation owned by Chrysler shareholders.''
More than a dozen senior Chrysler executives have resigned, retired, or been forced out since the deal was finalized. On Nov. 17, Chrysler president James Holden was fired by Schrempp and replaced by Dieter Zetsche, a veteran Mercedes-Benz executive.
Besides Daimler-Benz, DaimlerChrysler and Schrempp, the suit filed in U.S. District Court in Delaware also names as defendants Manfred Gentz, the company's chief financial officer, and Hilmar Kopper, the chairman of its supervisory board.
Before the merger, Kerkorian was often at odds with Chrysler management over the direction of the company, culminating with a $23 billion bid in 1995 to buy Chrysler. That bid failed, but in return for peace Kerkorian was given a seat on Chrysler's board.
Since the merger, the value of DaimlerChrysler's shares has dropped steadily, reaching an all-time low of $37.90 after Holden's ouster and Zetsche's appointment earlier this month.
Chrysler posted a $512 million loss in the third quarter this year, as it boosted incentives to move a glut of minivans and other vehicles. Schrempp had said that Chrysler would post a profit in the fourth quarter, but the company has since said that Chrysler's results have continued to deteriorate.
Shares finished trading Monday at $41.50, up $1.02 on the New York Stock Exchange. |
