Blackstone’s Stephen Schwarzman is about to officially become a multigazillionaire, once his company goes public and everybody knows what his stake is worth. But in the public mind, will he really have overtaken Henry Kravis as the ne plus ultra of private-equity honchos? Maybe not. What he really needs is not more money, or more lavish parties; he needs to do something which will connect him to the entire country. You know, like buy Detroit.
Blackstone, it turns out, in concert with Centerbridge, is one of the two main suitors trying to buy Chrysler. The other is auto-parts supplier Magna International — if they become too much of a threat, maybe Schwarzman can buy them, too!
This certainly counts as a distressed sale for Chrysler. Daimler paid $36 billion for the automaker back in 1998, and now will be lucky if it gets $8 billion in this sale. But from the noises that Daimler’s shareholders are making, they’d be happy if DaimlerChrysler CEO Dieter Zetsche sold the US arm for a penny.
Purchasing Chrysler involves problems that go far beyond employee/retiree pensions and healthcare cost considerations.
Revamping the engine line will cost $2-4 billion, at a minimum. GM burned over $2 billion in revamping its truck engines a few years ago when it switched to the latest block designs. Chrysler doesn’t have any fuel efficient engines. Then the transmission problems that still haven’t been resolved. And even some of the truck rearend problems.
Add in R&D design needs plus the missing wind tunnel and there is another $5-10 billion that needs to be considered.
DaimlerBenz may be lucky to give away Chrysler.
Hey! Dr Z(see link), can we still ask you questions after you dump Chrysler?