Middle East concern becomes largest Daimler shareholder

The global economic crisis has forced even Daimler AG (purveyor of Mercedes-Benz cars and trucks) to go into damage-limitation mode, and the venerable company has just announced it was selling a 9.1 per cent stake to Abu Dhabi firm Aabar Investments PJSC.

Aabar is an affiliate of International Petroleum Investment Corporation (IPIC) and controlled by the Government of Abu Dhabi (which is the capital of the United Arab Emirates, as well as being the richest of the country's seven emirates).

In recent years, the Middle East is emerging as a player of note in the auto industry as Abu Dhabi-based Mubadala owns a five per cent share of Ferrari, while Kuwait's Investment Dar two years ago acquired a 50 per cent stake in Aston Martin.

The Kuwaiti Government also owned a 7.6 per cent stake in Daimler (which has been diluted to 6.9 per cent following the Aabar buy-in).

According to international wire reports, the latest deal sees Aabar purchasing 96.4 million Daimler shares at a five per cent discount under the stock price of 21.34 euros ($41.40), and in so doing it becomes the largest shareholder in the German carmaker.

A sobering indication of how far the motor industry has plummeted over the last few months is provided by the fact that Daimler shares were trading at 45 euros ($87) in June last year.

The global downturn has seen Mercedes-Benz sales dive by 17 per cent in the past quarter, and the company suffered a loss of $2.79 billion in the fourth quarter of last year.

Industry analysts say the tie-up will benefit both companies as Daimler needs to boost its cashflow in the current economic quagmire and, as part of the sweetener for Aabar, the Stuttgart-based manufacturer plans to build a training centre in Abu Dhabi.

Aabar also plans to cooperate with Daimler in developing electric cars, as well as new materials for the auto industry.

"It's a win-win situation for both companies," a Bloomberg report quoted Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, as saying.

"It's an attractive price for Abu Dhabi, and it's good for Daimler to raise cash and get a long-term investor, because the next two years will be very hard."

Declining vehicle sales across the globe has forced Daimler -- like many other manufacturers of late -- to scale back its operations, and it's done this by cutting car production in Germany and closing truck plants in North America.