DCX growing stronger

The news about the sale of Chrysler has caused Daimler shares to rise but on the part of Chrysler, Wall Street analysts are doubtful whether it can make it alone.

Wall Street analysts view the pronouncement sale of Chrysler by its parent company DaimlerChrysler AG the producer of Mercedes 300D parts has been advantageous for the German automaker but still taking a wait-and-see approach to see whether the Auburn Hills-based Chrysler can make it on its own.

The DaimlerChrysler stock (DCX) closed Monday at $84.12 up by $2.12 or 2.6 percent a share. It was also a good news for DaimlerChrysler when some analysts has listed the stock as a strong buy with one German analyst estimating the stock could eventually reach $120 especially when the deal on the sale of Chrysler is finished.

Analysts further say that the sale of the 80.1 percent of Chrysler to Cerberus has long been anticipated. The sale of Chrysler to the private multi-billion dollar investment firm would benefit both sides however they would have to sacrifice their nine years of partnership. The downfall of the DaimlerChrysler merger as viewed by many is caused by the different goals and different operating of the two automakers.

Despite the fluctuation on the stock price of DaimlerChrysler’s shares it has still been able to record an increase of $2.12 especially after the official announcement was made on the sale of Chrysler last February 14, 2007.

Craig Hutson, an analyst with Gimme Credit in Chicago said, "The Daimler stock since Feb. 14 when it was announced they were exploring options to sell off Chrysler has dramatically outperformed the market and its peers. Daimler had put itself in a position they had to go forward with a deal. Largely the sale was anticipated by the market, which could be one reason for the somewhat muted response after the announcement."

Last February 1 DCX traded at $63.12 and then suddenly increased to $69.78 on Valentine’s Day the day the DaimlerChrysler CEO Dieter Zetsche has announced that all options were being considered for Chrysler including its possible sales.

Then on April 5 after the announcement DCX reached an amazing increase trading at $84.80. The remarkable growth in price of DaimlerChrysler’s share according to most analysts will continue especially after the expected sale of Chrysler is concluded by the third quarter of this year.

Here are the benefits that Daimler will reap after the sale of Chrysler:

1. Daimler will become more stable and will face lesser financial risk without Chrysler.

2. Daimler will also get rid of the $19 billion in pension and health care liabilities that it will shoulder if its money-losing arm is not sold.

3. Daimler can now focus all its efforts, time, energy, and finances on profitable ventures especially on its premier cars and trucks.

According to Jack R. Nerad, an analyst with KBB in Irvine, California, "I see this as a very good move for Daimler."

Daimler is not the only one with the advantages even Chrysler will obtain benefits out from the sale such as:

1. Chrysler will finally get large cash funding from its new owners. This will give the Auburn Hills automaker far greater staying power to compete with the likes of Ford, General Motors and other foreign automakers.

2. Chrysler may now also focus its efforts in developing long terms strategy instead of worrying how it would fare from quarter to quarter.

3. Chrysler may now focus on North American and who knows maybe the inroads Jeep has made into China.

Dwyane Thomas is a part time cook and full-time auto-enthusiast. This 31-year old Civil and Environmental graduate is a consultant at one of the engineering firms in Pennsylvania.