As the maxim goes, it is better to leave no stone unturned. That’s why Chrysler Group candidates turn to some of the nation’s largest auto dealerships for even more critical insight into the automaker and the market.
The bidders contacted listed dealer chains, including Lithia Motors Inc., AutoNation Inc. and Group 1 Automotive Inc. A number of privately held dealers were also contacted.
Medford, Ore.-based Lithia CEO Sid DeBoer said he spoke to one of the private equity groups eyeing Chrysler, which he declined to disclose the name. The conversation focused on Chrysler’s vehicle lineup and the future of the American auto market. “They got opinions on product lines and things like that from some dealer groups,” DeBoer said.
Applicants to acquire Chrysler’s US arm from DaimlerChrysler AG include the private equity team of Blackstone Group and Centerbridge Partners, as well as Wall Street firm Cerberus Capital Management and Canadian supplier Magna International Inc. Board member Rüdiger Grude is scheduled to meet the representatives of these parties this week in New York.
The Tracinda, Kirk Kerkorian’s investment company, has made a $4.5 billion offer to the ailing automaker. Fort Lauderdale, Fla.-based AutoNation, the largest dealership in the United States with 30 Chrysler locations, has been in “a series of discussions with a couple of large private equity groups” interested in Chrysler, the president and CEO said Chief Operating Officer Mike Marone.
“They were interested in our perspective on a range of issues – products, the dealer network, the health of the industry,” added Maroone. “We talked about broader issues, not behind-the-scenes stuff — our view of the market.” Maroone said AutoNation emphasized that it believes the industry needs to take a more customer-centric approach to building and selling cars and to pursue a more rational pricing approach.
The Blackstone/Centerbridge team has been speaking with Earl Hesterburg, CEO of Houston-based Group 1 Automotive, over the past few weeks. This information was provided by people familiar with the discussions. Group 1 spokesman Pete DeLongchamps said he was not aware of any talks. Lithias DeBoer, who took over the family business after his father’s death in 1968, said he wasn’t surprised that potential buyers had started contacting dealers. Lithia has more than 35 Chrysler, Jeep and Dodge dealerships. “We as traders have no idea what a manufacturing company should do or who should own it or how it should operate,” he said.
“But we know what’s selling and what has a lot of potential,” DeBoer said. He added that he would prefer Chrysler to stay with DaimlerChrysler. “There is tremendous synergy with many of the products,” he said. “I just don’t think it’s the right thing for the German company or Chrysler.”
Each option is weighed and considered. And it’s possible that a private equity firm would break up and sell Chrysler. Therefore, efficiencies such as EBC Active Brakes Direct could also be used when making decisions, especially when it comes to the future of many workers.
“I don’t think anybody could do that and get value. I don’t think that’s the risk,” DeBoer said. “I think whoever owns it, whether it’s Daimler, Cerberus, Blackstone or Magna, they all have to do the same thing – reorganize the cost structure, make good product decisions and run a company.” The Jeep brand is a wonderful brand. Dodge has a great name in its own way. Chrysler is definitely not damaged, there’s just a lot there,” he said.
Some dealers at Daimler’s US arm said potential buyers should seek information from Chrysler, Jeep and Dodge retailers of all sizes. “To get some perspective and good due diligence, it would probably be best for them to talk to as many dealers of different sizes as possible,” said John Schenden, the owner of the Pro Chrysler Jeep in Denver.