DaimlerChrysler confirms in Chrysler sale talks

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BERLIN (Reuters) - DaimlerChrysler (DCXGn.DE) acknowledged for the first time on Wednesday it is talking with prospective buyers of its loss-making Chrysler unit, but it did not commit itself to a sale of the U.S. business.

"I can confirm that we are talking with some of the potential partners who have shown a clear interest," Chief Executive Dieter Zetsche told the annual meeting of the world's fifth-biggest carmaker.

"But it is also true that we need to keep all options open, and that I cannot disclose any details, because we need to have the maximum scope for manoeuvre," he said.

"So far I am satisfied with the process. Everything is going according to plan."

But critical shareholders wanted action.

"If Chrysler is finally led before the divorce court judge, we would be very grateful. But what happens if you don't find a new bridegroom or if he demands an inappropriately high dowry," asked Henning Gebhardt, head of German equities for Deutsche Bank (DBKGn.DE) fund management arm DWS.

Deutsche Bank has a voting stake of around 4.4 percent in DaimlerChrysler.

Hans-Richard Schmitz, representing shareholder activist group DSW, told Zetsche a Chrysler sale was pressing to ensure DaimlerChrysler did not itself become a takeover target.

"You can do the job yourself or a financial investor will come along and do the job for you," he said.

DaimlerChrysler stock eased 0.3 percent to 61.84 euros by 1008 GMT while the DJ Stoxx European car sector index (^SXAP - news) was up 0.3 percent.

Prospects of a deal that would reduce the group's exposure to Chrysler's volatile earnings have helped the stock outperform the index by 10 percent so far this year.

Selling Chrysler would unwind the spectacular 1998 merger of Daimler-Benz and Chrysler that never lived up to its billing by former Chief Executive Juergen Schrempp as a marriage made in car heaven.

Despite the recent surge, the stock trades around 14 percent below the level where it made its market debut in November 1998.

The company did not reveal who had expressed interest in Chrysler since DaimlerChrysler first said in mid-February it was examining all options for the U.S. business.

WIATING IN THE WINGS

Sources close to the situation have told Reuters that private equity groups Cerberus Capital Management (CBS.UL) and The Blackstone Group (BG.UL) plus Canadian car parts group Magna International Inc (Toronto:MGA.TO - news) are front runners to buy Chrysler.

The Detroit News paper said Cerberus, Blackstone and Magna had submitted formal offers and that DaimlerChrysler was expected to choose one bidder for exclusive negotiations by the end of April, hoping to get around $8 billion for Chrysler.

DaimlerChrysler reiterated its forecast for a significant increase in group profitability through 2009.

Chrysler will absorb restructuring charges of up to 1 billion euros ($1.33 billion) in 2007, but its loss from operating activities is expected to be less than in 2006, when it lost 1.12 billion euros, the company has said in the past.

Its restructuring plan will cut 13,000 jobs and close a plant as it tries to return to profit by 2008.

Consumers' shift to fuel-thrifty cars amid high pump prices hit Chrysler, the most reliant of the Detroit carmakers on light trucks and sport utility vehicles for profits.

Its U.S. sales fell 8 percent in March when adjusted for selling days, and first-quarter sales were off 6.9 percent.

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