Daimler is More Arabic and Less German This Week
By Chris Haak
It’s hard to imagine Daimler AG as anything other than the quintessential German car company (its star-crossed ownership of Chrysler from 1998 to 2007 notwithstanding), but the fact is, as of last Sunday, Daimler now has two major shareholders in the Gulf region. Most recently, Daimler issued 96.4 million new shares to Abu Dhabi’s Aabar Investments PJSC. The shares, priced at €20.27 each, raised €1.95 billion ($2.67 billion) for Daimler and mean that Aabar now owns 9.1% of the company.
The additional share issue, of course, dilutes the ownership stake of existing shareholders (which is why shareholders hate when companies issue additional shares). Feeling a real impact from the share issuance is the Emirate of Kuwait. The Emirate previously was Daimler’s largest shareholder, and saw its 7.6% stake shrink (as a percent of the company) to 6.9%. Altogether, this means that between Kuwait and Abu Dhabi, Arab countries now own at least 16% of Daimler. That’s still a minority stake, but it’s also an interesting twist for the company that invented the automobile – and is so proud of being a German company – is still based in Germany, but is gradually slipping out of German hands.
Daimler’s move came less than 10 days after BMW’s controlling Quandt family (which owns 46% of the company) put a proposed 7% equity swap between the two companies on ice amidst concerns that Daimler would dominate the partnership, as it did with Chrysler. (Funny thing about karma, huh? Perhaps the Quandts would have been more amenable to a pairing with Daimler had the company treated its red-headed step child in Auburn Hills a bit better). As reported by German publication Spiegel, instead of a broader alliance, the two companies will now focus mostly on joint purchases of unseen components such as batteries to get volume discounts, and possibly jointly develop a small-car platform at some point in the future. PSA, who is BMW’s joint venture partner in an engine alliance, nixed the possibility of Daimler joining the alliance.
Several analysts were surprised that Daimler’s capital position was seemingly so precarious that it needed to issue shares so soon. While Europe’s and Japan’s automakers are all in far better shape financially than GM, Ford, and Chrysler, that health is relative. Daimler had less cash than its German rivals BMW and Volkswagen at the end of 2008, but it’s also possible that the company will need to seek a further capital infusion or sell some assets to remain solvent.
Meanwhile, Japanese giants Honda, Toyota, and Nissan are all experiencing struggles of their own amidst the global recession and US auto sales depression. Honda and Toyota have asked for aid from the Japanese government and each of the Japanese Big Three have cut production dramatically, shuttered factories, and cancelled or shelved plans for some new models. The bottom line – nobody out there is in very good financial shape, and we’ll see continued attempts at mergers, joint ventures, and consolidations as the next 18 months drag on in a depressed industry.
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