Trial in DaimlerChrysler Merger Case to Begin

One side calls it a merger of equals, a transatlantic union that created a global automotive giant. The other claims that the deal was a veiled takeover, orchestrated to bilk shareholders out of billions of dollars.

A three-year battle between billionaire investor Kirk Kerkorian’s Tracinda Corp. and German-American automaker DaimlerChrysler is scheduled to come to a head today in U.S. District Court in Wilmington, Del.

Barring a last-minute settlement or delay, the trial will feature testimony from the reclusive Kerkorian and top executives of DaimlerChrysler, including Chairman Jurgen Schrempp.

Kerkorian sued DaimlerChrysler in 2000 after the London-based Financial Times quoted Schrempp as saying he never meant for the 1998 merger to be one of equals and that the deal was billed that way “for psychological reasons.”

Chrysler shareholders, including Kerkorian, claim they were duped into approving a so-called merger when in reality Daimler-Benz was acquiring Chrysler.

Kerkorian, whose Tracinda investment arm once held 14% of Chrysler’s stock, says Schrempp -- then chairman of Daimler-Benz -- and other company executives misled shareholders to cheat them out of an acquisition fee that would have been due had Chrysler been purchased.

Some observers have estimated that a judgment for Kerkorian could amount to as much as $4 billion.

Gerald Meyers, former chairman of American Motors Corp. and now a faculty member at the University of Michigan, said Kerkorian had a chance to enrich himself further while also showing he was “dedicated to the proposition that shareholders should be treated better.”

At the same time, Schrempp and DaimlerChrysler must try to show that Kerkorian’s claims result from a misinterpretation by shareholders of a complicated business deal, Meyers said.

DaimlerChrysler has said that Kerkorian not only approved of the acquisition but also pushed for its completion and that a Tracinda executive sat on Chrysler’s board during the process.

Key to the case, Meyers said, are Schrempp’s comments to the Financial Times.

“Deep down I think he didn’t mean to get caught, but he got caught,” Meyers said. “He got caught saying something that either wasn’t true or it was true, and he shouldn’t have said it.”

Last week, U.S. District Judge Joseph J. Farnan Jr. rejected DaimlerChrysler’s final attempts to have the case dismissed, saying evidence suggested that the deal was a covert takeover from the outset.

“Tracinda’s evidence demonstrates that defendants mounted a full-scale communications campaign aimed at concealing their intent to take control of Chrysler and pressing the ‘merger of equals’ concept,” Farnan, who will preside over the trial, said in a ruling.

The trial is expected to last about two weeks.

From Associated Press