- The Washington Times - Tuesday, December 2, 2003

WILMINGTON, Del. (AP) — Billionaire investor Kirk Kerkorian testified yesterday that he never would have supported the deal creating DaimlerChrysler if it had not been portrayed as a “merger of equals” between the American and German automakers.

Mr. Kerkorian, who is suing the company for more than $1 billion in compensatory and punitive damages, said that in his dealings with former Chrysler Chairman Robert Eaton there was no indication the Daimler Benz-Chrysler combination was anything else.

“It was called a merger of equals. … It was always called a merger of equals,” Mr. Kerkorian testified in federal court.

Mr. Kerkorian, whose Tracinda Corp. was the largest Chrysler shareholder at the time of the merger, claims Daimler-Benz officials secretly organized a Chrysler takeover while proposing a merger of equals.

As a result, Mr. Kerkorian claims, Daimler-Benz avoided paying him an acquisition fee of up to 62 percent on his shares when the companies merged. Mr. Kerkorian owned 14 percent of Chrysler’s shares at the time of the merger.

DaimlerChrysler maintains that Mr. Kerkorian supported the deal and grew disgruntled only when his shares lost value.

A key issue in the lawsuit is a 2000 interview that DaimlerChrysler Chairman Jurgen Schrempp gave to the London-based Financial Times. In the interview, Mr. Schrempp was quoted as saying he never meant for the merger to be one of equals, and that the deal was billed that way “for psychological reasons.”

In the interview, Mr. Schrempp described Chrysler as a “division” of Daimler and said the German-heavy management “was always the structure I wanted.”

Mr. Kerkorian said yesterday that he would not have supported the deal if the article had appeared at the time, and that he was surprised and upset by the report.

He said his doubts about the deal being a merger of equals grew when Chrysler Chairman James Holden was fired a short time later and replaced by Dieter Zetsche.

“Everything fell in place,” he explained. “The article, Holden being fired, people coming over from Stuttgart [Germany].”

Mr. Kerkorian said the trust that he considers critical in his business dealings was lacking in the merger.

“You have to have trust and honesty,” Mr. Kerkorian said. “Instead, if you get deceit and fraudulence, which I feel has happened here with Daimler, it doesn’t work.”

Mr. Kerkorian said he trusted Mr. Eaton, his only contact with Chrysler management.

He testified that Mr. Eaton came to him in early 1998 to discuss the proposed deal. Mr. Kerkorian said Mr. Eaton told him he needed Mr. Kerkorian’s Tracinda Corp., which owned about 89 million Chrysler shares, to support the deal or the Chrysler board would not go along.

“It was very important that we go along with it,” Mr. Kerkorian testified.

DaimlerChrysler paid $300 million in August to settle similar claims from other investors. DaimlerChrysler said that lawsuit was groundless, but it settled to avoid a jury trial.

In this trial, there is no jury. The judge will decide the case.

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