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Mercedes-BMW Link, Mercedes-Opel Rumours Soar, Die

Daimler Results Distorted By Lingering Chrysler Interest.
Prognosis for Mercedes Future Looks Good Though.

The turmoil in car markets inevitably leads to wild rumours about takeovers and mergers as sales plunge and red ink engulfs balance sheets.

The well rehearsed report that BMW and Mercedes are about to step up cooperation excited stock markets for a while, as did a report that Mercedes might make a good partner for GM Europe’s ailing Opel.

Daimler announced a net loss of €1.53 billion in the 4th quarter, compared with a profit of €1.7 billion in the same period of 2007. The fact that all of the loss and more (€2.01 billion) was down to Daimler’s stub holding in Chrysler, didn’t deter the rumour-mongers.

“BMW shares rise on speculation of Daimler cooperation” said the Reuters’ headline, reiterating a long known fact that the two companies are talking about cutting costs by sharing research on some under-the-skin products and manufacturing.

Nothing to report
Commerzbank analyst Daniel Schwarz actually was expecting some development in talks with BMW.

“Asked about possible cooperation with BMW, CEO (Dieter) Zetsche stated that there is nothing to report at the moment – disappointing given our assumption that management would announce significant steps in this direction with Q4 results,” said Schwarz.

Schwarz has said BMW/Mercedes cooperation in purchasing, R&D and financial services could generate annual costs savings of up to €3 billion.

Deutsche Bank’s Gaetan Toulemonde also sees big benefits to such cooperation, and agrees with the €3 billion estimate, but cautions about the time scale of the payoff.

“In order to fully realize savings, it would obviously require the product portfolios to be harmonized. This would take at least a decade given the differing cycles,” Toulemonde said.

Another rumour to rise and fall had Mercedes buying GM Europe’s ailing Opel.

According to Bernstein Research’s Max Warburton, Mercedes parent Daimler would make a natural saviour of Opel. Mercedes has an appalling record in the small car segment, Warburton said in a report, losing almost €7 billion making Smarts and the A class.

Everybody wins
Opel is reportedly seeking help from the German government to finance a 3.3 billion euro liquidity shortfall through 2011.

Warburton believes a Mercedes takeover of Opel would be a winner.

Mercedes lacks small car expertise in a market increasingly focussed on smaller, fuel efficient vehicles. Mercedes could probably acquire Opel for little up-front cost. German Chancellor Angela Merkel would be grateful for having a tough decision taken off her hands which could have cost the jobs of thousands of workers.

Warburton said Germany’s BMW, Peugeot and Renault of France or Fiat of Italy might also be interested in acquiring Opel.

“We believe a German solution is far more likely,” he said.

Mercedes denied it had any such plans. But an Opel source said in late February that Daimler might buy Opel’s plant in Eisenach, eastern Germany, where the Corsa small car is made.

Meanwhile, UniCredit automotive analyst Sven Kreitmair said despite Mercedes high inventory problem, things were looking relatively good.

“Daimler is still in a better financial position than most Western European competitors excluding BMW and VW. Furthermore, the market now knows about the inventory problem and its impact on 2009 results, which should allow the stock price to recover in the short term,” Kreitmair said.

Neil Winton – March 2, 2009

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