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Chrysler Selling 12% Stake in Peugeot to Raise Cash

June 03, 1986|JAMES RISEN | Times Staff Writer

DETROIT — Chrysler said Monday that it is selling its minority stake in Peugeot, the French auto maker, in order to free up more cash for spending on new cars and trucks in the United States. The No. 3 auto maker said its 12.5% holding of Peugeot stock and stock warrants, currently worth about $275 million, will be sold by June 11. The proceeds will go directly into Chrysler's capital spending program.

"This is a strategic decision based on our investment priorities," Chrysler Chairman Lee A. Iacocca said in a prepared statement. "We are making huge investments in building cars and trucks in North America" and so need the money from the stock sale. "This next 12 months alone, our capital spending will approximate $2 billion," he said.

Chrysler noted, however, that its ongoing commercial relationship with Peugeot (Chrysler buys some engines from the French firm and distributes Peugeots in Canada) won't be affected by the stock sale.

Chrysler first obtained a stake in Peugeot in return for the sale of Chrysler's troubled European operations to the French firm in 1978. Later, it received the warrants, or stock purchase rights, as part of a 1983 joint bond issue with Peugeot.

Iacocca had once seen Chrysler's stake in Peugeot as a key building block in forging what he grandly called "Global Motors." During the last recession, when it seemed that Chrysler could not survive on its own, Iacocca cherished a dream of combining Chrysler and its two foreign partners--Japan's Mitsubishi and Peugeot--into a worldwide auto empire large enough to challenge General Motors and Toyota.

But Iacocca has seldom mentioned Global Motors since Chrysler has become enormously profitable and Peugeot has suffered big losses. At the same time, joint ventures, rather than mergers, have become the pattern for international combinations in the auto market; Chrysler has already formed a joint venture with Mitsubishi to build cars in the United States and no longer appears to need much help from Peugeot.

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