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Business

DaimlerChrysler Mulls Investment in Mitsubishi's Fuso

In a bid to expand its business in Asia, the German-U.S. car giant plans further investments at its loss-making Japanese subsidiary Mitsubishi Motors, this time focusing its attention on commercial-vehicles unit Fuso.

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DaimlerChrysler may take a major stake in Mitsubishi Motors' commercial-vehicles unit Fuso

German-U.S. car giant DaimlerChrysler AG plans further investments at its loss-making Japanese subsidiary Mitsubishi Motors Corp. (MMC) in a bid to expand its business in Asia.

People close to the matter said that DaimlerChrysler, already the world's biggest trucks maker, is currently examining a spin-off of MMC's commercial-vehicles unit, Fuso, and the possibility of taking a majority stake in the unit.

A company spokesman responded with caution to an inquiry by Handelsblatt. He merely confirmed that a spin-off of Fuso was currently under consideration. "We have to formulate a strategy [on this issue] before the end of this year," he added. In doing so, a majority takeover of Fuso was only one of several options, he said.

Former Daimler manager Rolf Eckrodt is due to take over at the helm of the Japanese subsidiary on June 1.

Within DaimlerChrysler, additional investments at MMC are not undisputed. The company is undergoing restructuring and is weighed down by a debt mountain totaling 13 billion euro.

Some voices at DaimlerChrysler have been warning of "skeletons in MMC's closets".

DaimlerChrysler is also battling with huge losses at U.S. unit Chrysler as well as with the downturn on the global trucks market.

On the other hand the Asian market is seen to offer particularly strong growth potential.

Daimler executives have been on a fact-finding mission at Mitsubishi since the middle of March. Their work is to be completed in June, with DaimlerChrysler due to take a decision thereafter, according to information obtained by Handelsblatt.

Industry experts believe a spin-off of Mitsubishi's profitable trucks unit would make sense. MMC's pearl could be integrated into DaimlerChrysler without problems, they said.

But MMC's debt mountain is seen as the biggest obstacle to DaimlerChrysler's expansion plans in Japan. "If DaimlerChrysler takes a controlling stake in MMC it will have to fully consolidate its debt," said Georg Strürze, car analyst at HypoVereinsbank.

With a stake of 37.3%, the U.S. German group is currently MMC's biggest shareholder.

On Monday, MMC is expected to report a first success of its restructuring: for the first time in three years it will post a small profit.

Fuso, the world's tenth-largest trucks maker, makes 60,000 vehicles a year. According to WestLB, the unit has a value of around 1.5 billion euro.

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