DaimlerChrysler on verge of splitting

This loss was in stark contrast to Mercedes' operating profit of £1.6bn and strong results from the commercial truck group. The company has hired JPMorgan to assess the various avenues that could be taken to restructure the relationship, and DaimlerChrysler chairman Dieter Zetsche acknowledged that all options are on the table. He said: “We revisited our strategy for the entire group including the Chrysler group. We tried to understand better where we are and what potential options are.” Reports have suggested the group is considering various options including an outright sale, offloading Chrysler to shareholders, or continuing the set-up with changes. Potential hurdles to any sale of the group are the high costs of Chrysler's worker liabilities in the US, which can add up to £24bn to the costs per vehicle, as well as pensions and healthcare liabilities. Since Daimler-Benz bought Chrysler in 1998 the brand has struggled in the US, with consumers increasingly opting for cars and cross-over vehicles and not Chrysler's core SUVs and pick-up trucks. This has contributed to a large stock build-up with declining demand. Chrysler's worldwide sales last year decreased by 5 per cent to 2.7 million units, delivering £1.5bn in revenues, down by £24bn from 2005. Potential buyers within the motor industry are Ford and GM, as well as Asian brands such as Honda, Toyota or even Chinese manufacturer's looking to expand in the US market. With Chrysler expected to report another loss this year, an ambitious recovery and transformation plan has been formulated, aiming to restore the group to profit within a year. The group has already announced a plan to close four plants and cut 13,000 jobs in the USA and Canada and slash operating profits by up to £154m. Annual production could be reduced by 400,000 vehicles, with focus switched to cars and fuel-efficient vehicles.