Tracinda's offer to buy Chrysler could collapse unless the investment vehicle controlled by Nevada billionaire Kirk Kerkorian can rapidly find a way to enter into negotiations with DaimlerChrysler, the German parent of the US automaker.
Thirteen days ago, Tracinda jolted the auction for Chrysler by offering to pay $4.5bn for the struggling unit. But Daimler did not consider Tracinda's offer to be serious enough to invite it into negotiations on a par with three other groups of potential bidders. Tracinda demanded exclusive negotiations with Daimler, which many people close to the process believe was an unreasonable demand.
Now Tracinda, which appears to be growing increasingly frustrated by Daimler's lack of consideration, is under pressure to at least drop its request for exclusivity to gain a seat at the table.
Tracinda could also try to raise its bid to curry more favour with Daimler. Tracinda's offer is lower than others on the table from at least three other bidders. Consortia led by buy-out groups Cerberus Capital Management and Blackstone, and Magna International, the Canadian auto parts and assembly maker, are understood to have made offers close to $5bn or more.
Mr Kerkorian's continued interest in Chrysler is exasperating some Daimler executives who believe he is seeking to make money out of the company for a third time. Relations were particularly soured by his lawsuit arguing that Daimler paid too little for Chrysler in 1998 despite his support for the merger.
All parties now have private equity groups as at least part of their bid, after Magna, which confirmed on Friday for the first time that it was involved in the process, told Canada's Globe and Mail that it was talking to Onex, the country's most prominent buy-out firm.
Tracinda has argued that it can take a longer term investment horizon in owning Chrysler than private equity buyers.
All parties are not commenting on the bid process except for Daimler, to reiterate that it is in talks with potential buyers and that "all options" are open. Daimler may not cut all ties with its US division and is considering staying invested in Chrysler through a minority stake, it was claimed.
Last year, Mr Kerkorian briefly captured the attention of the global automotive industry when, as a minority shareholder of General Motors, he compelled a reluctant GM to examine a possible alliance with Renault and Nissan, which it rejected. Tracinda later sold its stake in GM, which reached 9.9 per cent at its highest.
Mr Kerkorian's attempt to engage the United Auto Workers trade union by offering a "true partnership" including equity participation in the deal has been echoed by many other bidders. - Financial Times Service