Executive’s Notes Revealed in Daimler Trial

Former Chrysler executive Gary Valade wrote that some of his colleagues considered the automaker’s 1998 combination with Daimler-Benz “almost a takeover,” according to notes unsealed Monday as part of billionaire Kirk Kerkorian’s lawsuit over the transaction.

Valade, now head of purchasing for DaimlerChrysler, made the notes during discussions over whether to combine what was then the No. 3 U.S. carmaker with the maker of Mercedes-Benz luxury cars. Kerkorian contends that German executives deceived investors by cloaking the acquisition as a merger of equals.

U.S. District Judge Joseph J. Farnan halted the trial last week after DaimlerChrysler’s lawyers said they failed to turn over some of Valade’s notes to lawyers for the 86-year-old investor. Kerkorian, once Chrysler’s largest shareholder, has asked the judge to rule in his favor because of the failure to turn over the notes.

Valade, who was then Chrysler’s chief financial officer, wrote that former Chief Executive Robert Eaton said in a March 2, 1998, meeting with Daimler executives that the combination was “structurally almost a takeover.” The notes were unsealed by the judge at a hearing in Wilmington, Del.

Other undated notes taken by Valade show Chrysler executives worried that shareholders would view the transaction as a “loss of independence” and a “sellout for profit” by senior managers.

Valade’s notes show DaimlerChrysler Chief Executive Juergen Schrempp consistently describing the combination as a merger of equals rather than an acquisition by Daimler.

At a Feb. 11, 1998, meeting with Chrysler officials, Valade wrote that Schrempp said he wanted only to “consider a true merger, one management, one team, one board.”

At the hearing, Valade said he mentioned the notes to DaimlerChrysler’s in-house lawyer as he was flying to Delaware to testify. That prompted an internal investigation into whether they’d been turned over.

Lea Kuck, a partner at Skadden Arps Slate Meagher & Flom, which is representing DaimlerChrysler, testified that the internal investigation showed the documents were erroneously filed by a photocopying vendor. The law firm and the company did nothing malicious in failing to hand over the papers, she said.

DaimlerChrysler’s U.S. shares rose 78 cents Monday to close at $45.78 on the New York Stock Exchange.