Tokyo, Japan -- DaimlerChrysler AG drew the final curtain on its ill-fated investment in Mitsubishi Motors Corp. on Friday by selling its entire 12.42 percent stake in the Japanese carmaker.
Investment bank Goldman Sachs bought the stake and was placing the shares with institutional investors around the world, a financial source said. DaimlerChrysler, the world's fifth-biggest carmaker, said exiting the Mitsubishi Motors investment that it once saw as a pillar if its strategy of building a global car empire would boost 2005 financial income by around 500 million euros ($589 million).
Goldman Sachs declined comment on its purchase of DaimlerChrysler's nearly 548.4 million Mitsubishi Motors shares. The stock closed at 299 yen, down 2.6 percent, before the news broke. At full share value the sale would be roughly $1.39 billion, but a source familiar with the matter said DaimlerChrysler probably sold off the shares to for a substantial discount of up to 18 percent of Mitsubishi Motors' current share price.
Since DaimlerChrysler cut off its financial lifeline to its former affiliate in April 2004, the Japanese automaker has been bailed out by sister companies in the Mitsubishi group and investment funds through their purchase of new shares, reducing Daimler's controlling 37 percent stake. If shares held by group companies are included, Mitsubishi Heavy Industries Ltd. will still be Mitsubishi Motors' top shareholder with a combined 13.9 percent as of end-September, the automaker said.
The Wall Street Journal reported that Ruediger Grube, a member of DaimlerChrysler's management board who oversees the company's cooperation with Mitsubishi, would resign from Mitsubishi's board. Stuttgart-based DaimlerChrysler, which still has some close operational tie-ups with Mitsubishi Motors such as the joint development of engines and vehicle platform sharing, had repeatedly said it would hold on to its former partner's stake.
The partners said existing projects with Mitsubishi Motors would not be affected by DaimlerChrysler's disposal of the shares, adding that the companies planned to extend mutually beneficial projects. Analysts lauded DaimlerChrysler's move.
"Daimler showed good timing with the sale," said Michael Punzet, an analyst at Landesbank Rheinland-Pfalz.
"The money will help offset the financial burden from its planned job cuts," he added, referring to the reduction of 8,500 staff at the premium Mercedes division in high-cost Germany.
DaimlerChrysler said the cuts would cost it 950 million euros ($1.1 billion) in total.CASHING IN
Morgan Stanley noted that Mitsubishi Motors stock had traded as low as 72 yen after an in-house revolt forced DaimlerChrysler CEO Juergen Schrempp to pull the plug on financial aid.
Analysts and traders have said Mitsubishi Motors stock is still substantially overvalued, with three brokerages polled by Reuters Estimates putting the target price at 70 yen at most.
DaimlerChrysler last year sold its stake in Korea's Hyundai Motor Co. Ltd. and is divesting its heavy diesel motor unit MTU Friedrichshafen. It could use the cash from asset sales to top up pension contributions, finance restructuring of its Smart minicar business, invest in new models or channel money to investors via steady or even sweeter dividends, Morgan Stanley said.
Mitsubishi Motors on Thursday posted a smaller interim loss than it had forecast but offered a cautious outlook for the second half. It still expects to report a loss for the full year to March 2006 in what would be its third straight year in the red.