Hyundai Categorically Rejects Chrysler Overture

Chrysler LLC, seeing that life as it knows it is slipping by, has been looking for a suitor over the past few months, preferably another automaker to take over its ailing operation. Owned by Cerberus Capital Management, L.P., of equity management fame, the country’s third largest automaker just can’t seem to find a suitable partner. And, it isn’t as if they haven’t been trying.

In September, Chrysler began formal talks with General Motors — one that Cerberus hoped would result in GM acquiring Chrysler while Cerberus gained the remaining shares of GMAC, the financing company jointly owned by GM and Cerberus. Those talks were stopped last week when it became apparent that GM’s own dire status had worsened significantly.

In the middle of negotiating with GM, Chrysler sent out feelers to the Nissan-Renault partnership to see if there was any interest on the part of President and CEO Carlos Ghosn to acquire a stake in Chrysler, perhaps even the separate purchase of Jeep. Though Chrysler and Nissan had inked several strategic partnership deals throughout 2008, Ghosn turned down Chrysler’s proposition, choosing to continue with business as planned.

Most recently, rumors of a Hyundai take over surfaced fueling talk that the world’s fifth largest automaker would make a bid for Chrysler. Already a significant shareholder of Kia and the fastest growing automaker in the world, a Chrysler conquest would have made Hyundai the third largest automaker, immediately behind Toyota and General Motors.

But, Chrysler has learned that finding an automaker is one thing, but having them interested in you is entirely something different. Yesterday, Hyundai laid all rumors to rest by stating emphatically that they had their hands full expanding their own operation. Thus, the rapidly growing automaker from Seoul has decided to stay the course and let Chrysler fend for itself.

At this point in the game deliverance for Chrysler will probably come in the form of a government bail out, even beyond the loan money already promised by the federal government.  It’ll be a stopgap measure, one that could buy the automaker some time before reality sets in and the company finally goes under.

Chrysler and General Motors might still be forced together shotgun style by the federal government, but that move will only delay the inevitable: government bankrolling of corporate mergers just doesn’t work, resulting in eventual dissolution or the taking over of assets by another company. A prime example of this sort of scenario is Penn Central which eventually morphed into Conrail before its assets were sold to a pair of private railroad operators.

Could there still be a white knight in Chrysler’s future? Possibly, if that automaker is foreign based and the federal government sweetens the deal by basically handing over Chrysler (or Jeep alone) to a suitor. Neither Honda or Toyota are interested, but we still haven’t heard anything from Volkswagen.