DaimlerChrysler and Mercedes-Benz Divorce? - Another American Marriage Gone Bad

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Washington DC February 21, 2007; The AIADA newsletter published this opinion from Paul Ingrassia, former Detroit correspondent for the Wall Street Journal and vice president of news strategy for Dow Jones.

Mr.Ingrassia said he believes that the merger of Daimler-Benz AG and Chrysler Corp. failed because the synergies were overestimated and the clash of cultures made things much worse.

Germans, even though they proposed the merger and dominated it, always feared that Chrysler would sully one of their national icons.

Amid the speculation of what lies ahead for Chrysler, this much is clear: Chrysler's woes are just the latest chapter in the implosion of Detroit's Big Three.

How did things go so wrong, so quickly? For one, Detroit's profits were far too dependent on big, gas-thirsty vehicles, which became painfully clear after Hurricane Katrina.

Crisis is starting to force change, however belatedly. General Motors has gotten 35,000 UAW workers, about one-third of GM's total, to accept a buyout plan and is expected to be profitable this year, but has told investors that cash flow will remain negative.

Mr. Ingrassia thinks that it is unlikely that GM will buy Chrysler. Various press reports say exploratory talks have occurred, but GM, despite recent progress, has huge problems of its own, and doesn't need to boost its exposure to the UAW and the North American market.

Possibly the most intriguing scenario is that a consortium of private-equity firms might buy Chrysler. Or a real long-shot buyer: a private investor like multibillionaire Kirk Kerkorian.