DaimlerChrysler Trial Captures Industry’s Imagination | Business| Economy and finance news from a German perspective | DW | 30.11.2003
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DaimlerChrysler Trial Captures Industry’s Imagination

In a star-studded trial set to begin on Monday, top figures from auto giant DaimlerChrysler will take the stand in a U.S. federal court to ascertain whether the deal that created the company was based on lies and deceit.


DaimlerChrysler CEO Schrempp will be talking from a very different podium in the next weeks.

The eyes of the business world will turn to a federal court in Wilmington, Delaware in the United States on Monday when the three-year legal battle over the mega-merger between Germany's Daimler-Benz and U.S.-based Chrysler comes to a dramatic head, five years after the deal went through.

The trial, brought to the court in the form of a lawsuit by billionaire Kirk Kerkorian, will determine if there was some kind of secret deal between the German and U.S. companies that Kerkorian claims duped Chrysler shareholders.

Kirk Kerkorian

Kirk Kerkorian.

Kerkorian (picture), who was the largest shareholder in Chrysler at the time with 13.7 percent, believes he and others were led to understand that the 1998 deal was a "merger of equals" rather than a takeover by the German automaker.

Allegations of fraud

The drama will be increased by the appearance of a number of major players from the business world, including DaimlerChrysler Chairman Jürgen Schrempp, the architect of the deal that is at the core of the case. Schrempp will face allegations in the federal court that he lied in a successful bid to convince Chrysler shareholders of the nature of the $36 billion (€30 billion) deal. He faces allegations of fraud and a violation of U.S. securities law.

Former Chrysler chairman Robert Eaton and former president James Holden will also appear as witnesses for Kerkorian and his holding company, the Tracinda Corporation.

Although Judge Joseph Farnan has ordered DaimlerChrysler chairman Schrempp to appear, the exact timing of his courtroom appearance has been left to the discretion of his lawyers with speculation that Schrempp will feature in the second week of the trial.

The so-called bench trial will be heard without a jury with Judge Farnan deciding the verdict at the conclusion which is expected on December 17.

Deal claimed to cost shareholders billions

Flagge von DaimlerChrysler in Stuttgart

DaimlerChrysler's headquarters in Stuttgart.

Kerkorian is expected to be among the first witnesses. The Las Vegas casino mogul, who has achieved both fame and notoriety for his involvement in the takeovers of MGM studios and Trans World Airlines, is seeking damages of at least $3 billion, alleging that the Daimler management team mismanaged the US automaker, cost shareholders billions of dollars and turned the DaimlerChrysler into a German company, leaving the struggling Chrysler division to be run by executives dispatched from the company’s corporate headquarters in Stuttgart.

Kerkorian filed the lawsuit suit after Schrempp told the Financial Times in October 2000 that it was always his intention to make Chrysler a mere division of a new global automotive giant. "If I had gone and said Chrysler would be a division, everybody on their side would have said: 'There is no way we'll do a deal.' But it's precisely what I wanted to do," he told the business daily at the time.

Defense says case will fail

Michael Schell, attorney for DaimlerChrysler, issued a statement ahead of the start of the trail in which he said that he believed the suit had no merit and would fail. "(The plaintiffs) are going to have to prove their case, and our position is they're not going to be able to do that. They are not going to be able to support the allegations, which we thought were outlandish when they made them."

Daimler kauft Chrysler

Daimler-Benz Chairman Schrempp and Chrysler Chairman Eaton sign the deal but was it all above board?

"We will demonstrate that Daimler-Benz and Chrysler had an agreement, they wrote it down, and then they went about performing it," Schell said. "There’s not a single thing they promised that they didn't do, and there's not an agreement somewhere out there in the ether."

Merger would not have gone ahead

Although Kerkorian’s lawyer Terry Christensen has refused to speak about the trial, an official statement from Tracinda has argued it would not have agreed to the merger if it had known Daimler-Benz's "true intentions."

The latest trial revolving around the DaimlerChrysler deal comes only three months after the company settled out of court with a separate group of former investors, who had also claimed Daimler-Benz had deliberately disguised its intentions, to the tune of $300 million in August.

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