Daimler Takes Charge

eae01 at health.state.ny.us eae01 at health.state.ny.us
Wed Jun 17 18:08:00 PDT 1998

Brilliant again! Confess, you're really Doug Henwood, aren't you?

----------------------------Original message---------------------------- Date: Wed, 17 Jun 1998 17:48:23 -0700 (PDT) From: Dennis R Redmond <dredmond at OREGON.UOREGON.EDU> Subject: Daimler Takes Charge In-Reply-To: <v03102806b1ae1817012a@[]> To: lbo-talk at lists.panix.com Sender: owner-lbo-talk at lists.panix.com Precedence: bulk Reply-To: lbo-talk at lists.panix.com

One additional note about the whole Daimler-Chrysler thing LBOers should know about: Daimler-Benz (DB) was making good money in the early Nineties, then the recession hit, and they lost something like $5 billion in 1996. Or so their accountants said. Schremp claimed it was because of writeoffs on a bunch of unrelated investments that went sour: primarily Fokker, a Dutch aircraft maker which went belly-up, and AEG, an engineering firm.

I remember being mystified as to how DB could lose $5 billion, given its incredible profit margins; sure, some of its investments went sour, but Debis, a services subsidiary, made more than enough money to pay for temporary losses elsewhere, and DASA, the heart of the Airbus consortium, kept climbing to new heights of market share. Now we now otherwise: they didn't pay a dividend that year, dodged some taxes, and in effect, used the money to front their buyout of Chrysler (they're paying more than what Chrysler's stock was trading at, remember). Clever, clever, clever. And of course they did a great job of pitching the thing as the old "learning from America" story -- soothing to the ears of American rentiers, but the reality is, Chrysler is being gobbled up like Rolls Royce.

Now the talk is that Daimler is eyeing Nissan Diesel, the truck subsidiary of Nissan, who's run into some cash-flow problems; there are also rumors that DASA is going to become the holding firm for the entire Airbus consortium, once the thing is truly well and privatized. Daimler's global push, in other words, is accelerating.

It'll be interesting to see if the other big European multis -- Philips, Siemens, etc. -- copy Daimler's strategy and begin to take over other large-scale firms in the near future. Siemens just sold its PC biz to Acer, the Taiwanese computer firm, so they have a pile of cash which needs investing somewhere, and unlike the US, where rentier debauchery is the norm, Central Europe still has this funny fixation with making things, like smart cards and mobile phones. My guess is that they will, and that these activities are going to drive a humongous expansion of the European capital markets -- at the expense of Wall Street, to be sure. Something to ponder, while we await the crash of the American bubble economy.

-- Dennis

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