Oil-rich emirate Dubai bought a $1 billion stake in DaimlerChrysler to become its third-largest shareholder – a sign of what could lie ahead for struggling Detroit.
The purchase came through the Dubai government’s wholly-owned Dubai Holding company, set up a year ago to handle the emirate’s vast billions and offset its dwindling crude oil reserves.
“We welcome Dubai as a long-term investor, which shows it believes in DaimlerChrysler’s potential,” a DaimlerChrysler spokesman said yesterday in announcing the deal.
The two biggest shareholders in the maker of Mercedes Benz and Chrysler cars are Deutsche Bank AG and Dubai’s wealthy Gulf state sister, Kuwait. Neither sold their shares for the deal, sources said.
Dubai bought about 2 percent of the company.
DaimlerChrysler, which has been reeling over three weak sales years, may consider building a Dubai assembly plant or factory as part of the deal, analysts said.
General Motors and Ford are wrestling with declining sales and credit-rating pressures. With rising interest rates, they face serious problems due to their heavy reliance on internal financing of their vehicle sales as their biggest profit centers.
Dubai officials believe they bought the stock at a good time.
“This is a perfect time to acquire shares in DaimlerChrysler as the company begins to bear the fruits of its merger with Chrysler,” said Mohammed Al Gergawi, Dubai Holding’s chief executive. The government has also set up private equity firm Dubai International Capital to make U.S. and other foreign investments and acquisitions.
Dubai is part of the oil-rich United Arab Emirates (UAE).
DaimlerChrysler’s Middle East headquarters is in Dubai. It sold nearly 29,000 vehicles in the Middle East in 2004, up 14 percent from 2003.