Naughton: Who Will Buy Chrysler?

Las Vegas billionaire Kirk Kerkorian raised the stakes this week in the race to acquire Chrysler. His surprise $4.5 billion offer now puts pressure on the other bidders to top him. But even if the other deep-pocketed suitors offer more money, the nearly-90-year-old wheeler-dealer just might have an ace in the hole: Carlos Ghosn, Renault-Nissan's rock-star CEO. Last year, Ghosn and Kerkorian teamed up in an unsuccessful effort to get General Motors to become the American partner in Ghosn's Franco-Japanese auto alliance. Now, Chrysler could complete the global alliance that Ghosn continues to covet, analysts say. "I would not bet against the idea," says veteran analyst David Cole of the Center for Automotive Research in Ann Arbor, Mich.

Is Ghosn interested in making another run at a Detroit automaker? He isn't saying. But one of his top lieutenants told NEWSWEEK that his boss remains interested in aligning with a North American partner (read: Detroit automaker). "The alliance could be extended to a third auto company," Nissan North American senior vice president Dominique Thormann said. "The GM episode was more a confirmation of that hypothesis than anything else." Thormann made his comments in an interview at the New York Auto Show on Wednesday—one day before Kerkorian went public with his bid for Chrysler. Ghosn (rhymes with phone) achieved legendary status by bringing Nissan back from the dead—in Japan there's even a comic book superhero series based on him. But these days, Ghosn is busy fixing what he calls a "performance crisis" at Nissan, where U.S. sales fell 5.3 percent last year and the company is about to report its first drop in yearly profits since 2001. Still, Nissan, which is in the middle of rolling out seven new models, remains one of the world's most profitable automakers.

For a real crisis, look no further than Chrysler. The automaker lost $1.5 billion last year as rising gas prices sunk sales of the SUVs, minivans and pickup trucks that make up three quarters of its total sales. At parent DaimlerChrysler's annual meeting this week, angry German investors implored CEO Dieter Zetsche to cast out his American problem child. Zetsche (better known as Dr. Z in those zany Chrysler ads) confirmed that the company is in talks with several interested buyers. They include such elite Wall Street private-equity players as the Blackstone Group and Cerberus Capital, as well as Canadian auto supplier Magna International. Each has kicked the tires at Chrysler, visiting headquarters and going over the books. But none have gone public with an offer.

Kerkorian went public with his bid before he's even taken a test drive. But he knows a little about Chrysler, having once attempted a hostile takeover and later unsuccessfully suing DaimlerChrysler for hoodwinking investors into believing its acquisition of Chrysler was actually a "merger of equals." Despite those unhappy moments, Kerkorian still made a killing on his Chrysler stock in the '90s, earning upward of $2 billion. In a letter to DaimlerChrysler's supervisory board Thursday, Kerkorian's investment company Tracinda offered to do the deal in cash, with $100 million up front in exchange for a 60-day period of exclusive negotiations that would freeze out the other bidders. Even if the negotiations fail, Kerkorian says Chrysler can keep $25 million. Kerkorian also wants to make any deal contingent upon bargaining a contract with the United Auto Workers union, whom he is offering a substantial stake in the company in return for concessions on wages and benefits.

Besides cold hard cash, Kerkorian offered up something else: a familiar face. His longtime automotive adviser Jerry York is Chrysler's former CFO. York wrote his own letter Thursday to Zetsche, striking a friendly tone by reminding the DaimlerChrysler chief that the two first met three years ago at a retirement party for an old Chrysler colleague. York sought to distance his billionaire boss from the billionaires on Wall Street that are after Chrysler. Kerkorian, York insisted, is in for the long haul and would provide private ownership that would nurture Chrysler back to health by restocking its lineup with greener, gas-sipping cars. The other guys, he implied, are quick-buck artists that might carve up Chrysler. "The right (meaning exceptionally patient) private ownership can do things that are difficult for both public companies and the wrong (meaning not so patient) private ownership," York wrote. "The returns will not come quickly. Investors that feel the need to show 'mark to market' results in their funds in relatively short time frames (just a few years) will not be willing to invest as necessary over an unusually lengthy period of time to achieve the necessary end results."

This is where Ghosn could come in. As a board member at GM last year, York was the driving force behind the talks with Renault-Nissan. The arranged marriage would not have been a takeover but rather an alliance where each company shares ownership in the other. All three would share costs of engineering cars and buying parts, saving billions. But when GM CEO Rick Wagoner balked, York walked—resigning from GM's board a day after it rejected the deal. A month later, York's boss cashed out of his 10 percent stake in GM, breaking even on his investment (not the way a high-stakes gambler likes to leave the table).

Now that Chrysler is losing its German parent, it needs the global reach Ghosn offered even more than GM did. And Chrysler would give Ghosn a way to make serious inroads into the American pickup and minivan markets. Together, Renault-Nissan-Chrysler would be better equipped to take on the juggernaut that is Toyota, which is expected to overtake GM this year as the world's largest automaker. "Chrysler really needs a partner to get that global presence," says auto analyst Cole. "I don't see Chrysler ending up all by itself. And Jerry [York] understands that. That's why he pushed so hard at GM for the Renault-Nissan deal." If Kerkorian rides to Chrysler's rescue, York will have another chance to push for the Ghosn solution.