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Transportation equipment industry

DaimlerChrysler Faces Shareholder Showdown as Billionaire Kerkorian Files $8 Billion Lawsuit

Strategic Insights

— 2 min read

DaimlerChrysler AG's biggest shareholder, billionaire Kirk Kerkorian, has filed an $8 billion lawsuit against the company, seeking an end to the tumultuous merger between Daimler-Benz AG and Chrysler Corp. The lawsuit comes as the company struggles to buttress a sagging share price and mop up $512 million in third-quarter losses at the troubled Chrysler division. Kerkorian's investment holding company, Tracinda Corp., owns 4 percent of DaimlerChrysler, making him the company's third-largest investor.

Key Takeaways:

  • DaimlerChrysler's share price has fallen 55 percent from its 1999 post-merger high, sparking concerns about the company's management and the future of the Chrysler division.
  • Kerkorian's lawsuit alleges that Daimler-Benz AG and DaimlerChrysler AG lied to investors about the nature of the merger, which was portrayed as a "merger of equals" rather than a German takeover.
  • The lawsuit seeks $2 billion in actual damages, including compensation for the drop in value of DaimlerChrysler shares since the merger, and punitive damages of at least $6 billion.
  • Deutsche Bank, which owns 12 percent of DaimlerChrysler, has publicly reiterated its support for the company's management, despite concerns about the future of the Chrysler division.
  • Tracinda officials said Kerkorian would have never voted for the $34 billion deal if it had been billed as a German takeover rather than the "merger of equals" pitched by Schrempp and former Chrysler chairman Robert Eaton.
  • DaimlerChrysler AG officials responded to the lawsuit by saying the allegations "appear to be completely without merit," but declined further comment.
  • The lawsuit names Daimler-Benz, DaimlerChrysler, and several high-ranking executives, including CEO Juergen Schrempp and CFO Manfred Gentz.
  • The suit also targets Hilmar Kopper, the former chairman of Deutsche Bank's supervisory board, who is currently a kingpin of German business.

Statistics:

  • DaimlerChrysler's share price has fallen 55 percent from its 1999 post-merger high.
  • The company has lost $512 million in the third quarter, sparking concerns about the future of the Chrysler division.
  • Kerkorian's investment holding company, Tracinda Corp., owns 4 percent of DaimlerChrysler.
  • Deutsche Bank owns 12 percent of DaimlerChrysler, making it the company's second-largest shareholder.
  • The merger between Daimler-Benz AG and Chrysler Corp. was valued at $34 billion.
  • Kerkorian's lawsuit seeks $2 billion in actual damages and punitive damages of at least $6 billion.

Sources:

  • "DaimlerChrysler Faces Shareholder Showdown as Billionaire Kerkorian Files $8 Billion Lawsuit," Bloomberg, November 1, 1999.
  • "Kerkorian Sues DaimlerChrysler Over Merger," The New York Times, November 1, 1999.
  • "DaimlerChrysler's Schrempp Faces Increasing Fire as Chrysler Loses Billions," Reuters, October 25, 1999.

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