Tracinda Offers to Purchase Chrysler Group

Tracinda Corporation today announced it has sent a letter to DaimlerChryslerAG offering to acquire the Chrysler Group for $4.5 billion in cash. Tracinda intends to build and strengthen Chrysler as an independent entity by partnering with the United Auto Workers and senior management of Chrysler, and will offer the UAW and Chrysler management the opportunity to participate as equity partners in the transaction. Tracinda believes by taking a long-term approach to solving Chrysler’s problems, it can become a robust and lasting, stand-alone entity. Attached is the text of the letters sent today by Jerome B. York to Dr. Dieter Zetsche and by Tracinda to the DaimlerChryslerAG Supervisory Board: Dr. Dieter Zetsche DaimlerChrysler AG Mercedestrasse 137 Stuttgart 2M 70327 Germany Dear Dr. Zetsche: I had the chance to meet you briefly at Gary Valade’s retirement party in early 2004, and enjoyed our chat at the time, on Toyota pricing as I recall. Of course the several hundred in attendance at that event were in high spirits, as the impact of Chrysler’s early 2000’s turn around plan was beginning to exhibit remarkable results. But of course this was three years ago, when gasoline prices were still below $2.00 per gallon in the US, and before three more years of rampant healthcare inflation had taken place. As Tracinda’s letter to DaimlerChrysler’s Supervisory Board suggests, we have been following Chrysler closely and studying publicly available materials. And having been a major shareholder for over a decade we are very familiar with both Chrysler and the automotive industry, and have come to believe, all factors considered, that a private ownership approach is in the best interests of all Chrysler constituencies. The right (meaning exceptionally patient) private ownership can do things that are difficult for both public companies and the wrong (meaning not so patient) private ownership, specifically: 1. Take a very long term approach to solving Chrysler’s problems without worrying about "EPS results” for the initial five, six or seven year period it will likely take to build Chrysler into a robust and lasting, stand-alone entity. 2. Offer a substantial portion of equity in the company to the UAW as part of finding a solution to ever-rising healthcare costs, which not only are unaffordable by corporations, but over time will likely prove to be unaffordable by governmental entities as well. Regarding the first point, the necessary investments will have to be made in product development and manufacturing to [a] get Chrysler on a product renewal cycle that is fully competitive with the Asian producers in terms of newness, [b] shift the product mix towards "greener” segments, and [c] get product quality to the levels necessary to eliminate this as a bias in consumers minds towards purchasing Asian products. The returns will not come quickly. Investors that feel the need to show "mark to market” results in their funds in relatively short time frames (just a few years) will not be willing to invest as necessary over an unusually lengthy period of time to achieve the necessary end results. Long term, patient investing has been Tracinda’s approach. Aside from its decade-plus investment in Chrysler, it was the controlling shareholder of Metro-Goldwyn-Mayer for eight years from 1996 to 2004, and built the company through film library acquisitions into a public company worth two and a half times its acquisition cost in 1996. And more notably, Tracinda has been the controlling shareholder of MGM Mirage (originally MGM Grand) for twenty years—having built it into a public company with a market capitalization of nearly $21 billion today. That is what we believe all the Chrysler constituencies need. Not a "quick fix,” that may show good results three or so years from now, only to have the company possibly slip into another crisis situation. But a lasting fix that builds on the fundamental requirements in the automotive industry of product newness and quality, and in the process provides returns not only to the investors, but to the employees as well through their ownership stake. Accordingly, I hope that you and the Supervisory Board will carefully consider the proposal made today by Tracinda Corporation. Sincerely, Jerome B. York Supervisory Board DaimlerChrysler AG Mercedesstrasse 137 Stuttgart 2M 70327 Germany Gentlemen: Tracinda Corporation ("Tracinda”) has conducted a preliminary due diligence review of the Chrysler Group segment of DaimlerChrysler AG ("Chrysler”) by examining publicly available documents. Subject to satisfactory completion of more extensive due diligence, Tracinda is prepared to make an offer to acquire Chrysler for $4.5 billion in cash. Such offer would be subject to reaching a new satisfactory collective bargaining agreement with the United Auto Workers Union (the "UAW”), reaching an equitable arrangement with DaimlerChrysler regarding sharing of unfunded pension liabilities and health care costs of Chrysler retirees, as well as other customary conditions. The offer would not be subject to financing. Tracinda is confident that it will be able to obtain the necessary financing for the offer. Tracinda intends to build and strengthen the assets of Chrysler as an independent entity by partnering with the UAW and senior management of Chrysler. To this end, Tracinda will offer the UAW and senior management of Chrysler the opportunity to participate with Tracinda as equity partners in the transaction. Tracinda is prepared to immediately commence a more extensive due diligence review of Chrysler. Tracinda believes that it will be able to complete its due diligence within 60 days. Tracinda is also willing to enter into a confidentiality agreement containing customary terms and conditions. However, prior to devoting the considerable resources necessary to complete a thorough due diligence investigation of Chrysler, Tracinda requires that Tracinda receive an exclusive right to conduct due diligence for 60 days. In order to demonstrate its good faith and in consideration of the grant of exclusivity Tracinda is prepared to post a deposit of $100,000,000 with a mutually agreed upon escrow holder. If upon completion of its due diligence investigation Tracinda is not willing to pursue a transaction, and provided that Tracinda’s due diligence investigation does not reveal that Chrysler has material liabilities not reflected in information publicly available as of today, Tracinda is willing to forfeit $25,000,000 of the deposit. If a transaction is consummated the deposit would be applied towards the purchase price. Tracinda believes its offer would permit DaimlerChrysler to dispose of Chrysler at an attractive price and enable DaimlerChrysler to focus on its other operations. Tracinda also believes that the experience, expertise and financial strength Tracinda and its team will bring to Chrysler will greatly benefit Chrysler and its employees, suppliers and customers. We look forward to working with you to consummate a transaction. Very truly yours, Tracinda Corporation cc: Dr. Dieter Zetsche JP Morgan Chase