Magna Says It Won't Take On Debt in Chrysler Bid

Canadian auto parts manufacturer Magna International says it would not take on any debt to finance a purchase of DaimlerChrysler's Chrysler unit, according to a report in the Globe and Mail. The Globe also reports that Stronach wants DaimlerChrysler AG to retain a stake in Chrysler. Magna Chairman Frank Stronach says he expects to finalize a decision regarding the buyout over the next few weeks. The Globe reports that Magna has reached a partnership agreement with Canadian private equity firm Onex Corp. Stronach says the company holds $2 billion in cash, and has no plans of gambling Magna away. German automaker DaimlerChrysler said in February it would consider all options for its struggling North American unit, including a sale. Magna's annual shareholder meeting takes place Thursday. Analysts who follow the company say shareholders are likely to question Stronach on the deal, although the ultimate decision lies in his hands alone due to his majority stake in the company's Class B voting shares. Jennings Capital's Rich Morrow, who follows Magna, says the company may be getting in over its head: "It doesn't begin to address the whole range of skills that are required to be a successful carmaker... It's a whole set of skills for which there's no evidence they exist in Magna today."

Sources: MarketWatch, Reuters, Globe and Mail
Commentary: KeyBanc: 'Increased Likelihood' Magna Will Take Direct Minority Interest in Chrysler • DaimlerChrysler: In The Firm Embrace of Magna International • The Dating Game: Magna Likes Chrysler
Stocks/ETFs to watch: DaimlerChrysler (DCX), Magna International Inc. (MGA). Competitors: General Motors Corp. (GM), Ford Motor Co. (F), Toyota Motor Corp. (TM)
Conference call transcript: DaimlerChrysler AG Q4 2006

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