The frenzied speculation surrounding Chrysler’s future has not let up. In an e-mail to employees last Wednesday, Chrysler Group CEO Tom LaSorda said he was “writing to respond to the ‘frenzy of rumors’ that has enveloped the automaker since [the previous] week, when executives said all options — including a sale — were open,” Reuters reported.
“Journalists and analysts have been busy conjecturing over what will happen,” LaSorda wrote in his letter. “To a certain extent, that is the nature of their business and we need to keep it in perspective.”
LaSorda, Reuters noted, “told employees of the struggling automaker that it might take months before questions about a possible sale of the unit of DaimlerChrysler AG could be answered.”
Months before DaimlerChrysler can safely and legally respond to the haphazard reports of Chrysler’s possible sale/equity swap/”flotation”?! Journalistically speaking, that sounds like a recipe for disaster.
And, naturally, today Reuters moved to fill that months-long void, jumping a few steps ahead of itself to conjecture about the possibilities of DaimlerChrysler being taken over by lurking outsiders once it has gotten rid of Chrysler.
“Shorn of Chrysler, the rump DaimlerChrysler AG group could be more of a takeover target for hedge funds and private equity groups awash with cash, analysts say,” Reuters said, turning to analyst Sabine Bluemel, who herself “said a post-Chrysler approach from private equity investors was a realistic scenario.” With “scenario” the operative word, Bluemel told the news agency, “Of course, it is manageable, but it really depends on what kind of creature the spinoff of Chrysler will be and the crux is the legacy costs.”
Next Reuters quoted an unnamed “investment banker who follows the sector closely [who] said the likelihood of an unsolicited approach was still low but had gone up to 20 percent from 10 percent” — an invisible figure, but one that neatly supported Reuters’ headline, “Daimler without Chrysler faces more takeover risk.” The banker carefully noted that “a business hiccup could open the door to an unsolicited approach”: “If it skips a beat, if the truck market has a bad impact — particularly with the U.S. and Freightliner (trucks) — then potentially it is a more manageable thing for someone to come after them and split off cars and trucks.”
Thereafter Reuters reported, relying on a “person familiar with the situation,” that CFO “Bodo Uebber had routinely played down suggestions that hedge funds could team up to buy DaimlerChrysler because he felt such a wolfpack would be unable to agree on strategy and goals.”
“But should it come to pass that Chrysler is split off from Daimler, then Daimler would be an interesting target,” this source said, noting that a complete split-up of Daimler’s vehicle businesses would, in that case, be “a real danger.”
The story ended with “Officials at a private equity conference in Frankfurt [who] played down — but would not dismiss — prospects for an approach while Daimler figures out what to do with its ailing U.S. arm.” In other words, these two officials did not think Reuters’ idea was viable, but they did not rule it out, either. That’s not much payoff for all the anonymous sources Reuters used to find support for its conjecture.
That leads to a larger point: instead of chasing a story from Never-Never Land, the Reuters reporters in question could have worked to advance the story that the Financial Times advanced on its front page today — that “DaimlerChrysler is considering taking a minority stake in General Motors as payment for Chrysler if a deal between the two carmakers goes ahead.”
The Times hastened to add that “Other possibilities include a cash sale of Chrysler to private equity or industry investors and a flotation of the lossmaking unit” — so there are still a lot of possibilities — but overall the FT was able to drive its story forward better than Reuters did, as it “confirmed that a due diligence process is under way, led at GM by Fritz Henderson, chief financial officer.” (While Reuters itself reported earlier this month that GM and Chrysler had engaged in preliminary talks, this time around it merely quoted the FT’s report.)
As LaSorda indicated in his letter, analysts provide financial journalists with a steady stream of story material. But a crucial difference between the two he did not mention is that while analysts can conjecture all they please about Chrysler’s future, journalists should cut through the flotsam that is out there. Instead, too often, business reporters expand it.