In Re Daimlerchrysler AG Securities Litigation 00-CV-993-First
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COPY IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE In re DaimlerChrysler Securities Litigation ) Master Docket No. 00-0993 (JJF) ) FIRST AMENDED CONSOLIDATED CLASS ACTION COMPLAINT Lead Plaintiffs Florida State Board of Administration, Policemen's Annuity, find Benefit Fund of Chicago, Municipal Employees Annuity and Benefit Fund of Chicago, and Denver Employees Retirement Plan ("plaintiffs"), individually and on behalf of all persons who exchanged shares of Chrysler Corporation for shares of DaimlerChrysler AG in connection with the November 1998 merger and all persons who purchased shares of DaimlerChrysler AG in the open market from the time of the merger to November 17, 2000, allege the following upon information and belief, except as to those allegations concerning plaintiffs, which are alleged upon personal knowledge. Plaintiffs' information and belief are based upon, among other things, their investigation of. (a) the complaint in the action captioned Tracinda Corporation v. Daimler Chrysler AG, et a1.; C.A. No. 00-984, filed in this Court on November 27, 2000 (the "Tracinda Complaint"); (b) a registration statement filed with the Securities & Exchange Commission ("SEC") on or about August 6, 1998 under the Securities Act of 1933 on Form F-4 listing the registrant as "DAIMLERCHRYSLER AG as successor corporation to DAIMLER-BENZ AKTIENGESELLSCHAFT," and the proxy statement, prospectus and other addenda made a part thereof (collectively, the "Proxy/Prospectus "); (c) other filings made by DaimlerChrysler AG with the SEC; (d) press releases, public statements, news articles , securities analysts' reports and other publications disseminated by or concerning DaimlerChrysler, including an article published in the October 30, 2000 Financial Times reporting on an interview with Jurgen E. Schrempp, one of the defendants herein, an article from the November 4, 2000 edition of Barron's Magazine, also recounting an interview with Schrempp, and an article published in the March 5, 2001 issue of Forbes reporting on interviews with former Chrysler executives; (e) the book entitled, "Taken For a Ride: How Daimler-Benz Drove Off With Chrysler," by Bill Vlasic and Bradley A. Stertz (William Morrow, 2000); (f) statements from former Chrysler Corporation and former DaimlerChrysler executives, employees, suppliers and dealers of Chrysler and DaimlerChrysler; and (g) other publicly available information about DaimlerChrysler. Many other facts supporting the allegations contained herein are known only to the defendants or are exclusively within their custody and/or control. Plaintiffs believe that further substantial evidentiary support will exist for the allegations in this First Amended Consolidated Class Action Complaint after a reasonable opportunity for discovery. INTRODUCTORY STATEMENT In 1998, Chrysler Corporation ("Chrysler") and Daimler-Benz AG ("Daimler- Benz") merged (the "Merger") to form DaimlerChrysler AG ("DaimlerChrysler" or the "Company"), a Federal Republic of Germany corporation. In order to induce approval of the Merger by Chrysler stockholders, Daimler-Benz touted the transaction as a "merger of equals" that would create a combined company in which the Chrysler and Daimler-Benz constituents were equals in power, management and governance, and which would have dual headquarters in the U.S. and Germany. The Merger, at a price of $57.50 per Chrysler share, included a premium of only 28% over Chrysler' s market price because Daimler-Benz convinced Chrysler 2 management, which wanted a premium of at least 40%, that the lower premium was appropriate since this was not an acquisition but rather a merger of equals. Indeed, Daimler's own investment banking analysis showed Chrysler to be worth between $72.27 and $109.92 per share - between $10 billion and $36 billion more than Daimler-Benz paid. 2. Although the Proxy/Prospectus that was furnished to Chrysler stockholders for the special meeting called to consider and vote upon the adoption of the parties' Business Combination Agreement ("BCA") repeatedly characterized the transaction contemplated by the BCA as one which "will have the effect of continuing the respective businesses, stockholder groups, managements and other constituencies of Chrysler and Daimler-Benz in a'merger-of- equals' transaction," the truth - revealed last October in a shocking admission by defendant Jurgen Schrempp, who was Daimler-Benz's Chief Executive Officer and who now runs DaimlerChrysler - is that Daimler-Benz, unbeknownst to Chrysler shareholders, always intended to reduce Chrysler to a mere division within DaimlerChrysler. Contrary to what shareholders were led to believe, a merger of equals never was intended. 3. Schrempp's admission came on October 30, 2000 in the course of an interview with reporters Tim Burt and Richard Lambert carried in their "Comment & Analysis" article in the Financial Times on a day Schrempp was scheduled to attend a DaimlerChrysler board meeting in New York. With stunning candor, Schrempp stated that he no longer had any reason to maintain the fiction of the "merger-of-equals"; that "[t]he structure we have now with Chrysler (as a standalone division) was always the structure I wanted .... We had to go a roundabout way but it had to be done for psychological reasons. If I had gone and said Chrysler would be a division, everybody on their side would have said : `There is no way we'll do a deal."' 4. Consistent with Schrempp's October 2000 admission, there in fact has been no merger of equals. Contrary to what Chrysler shareholders were led to expect, there has been no combination of the companies' "complementary strengths" to create a stronger unified whole, there has been precious little sharing of technologies and know-how, there has been no dual operational control or dual operational headquarters, because, unbeknownst to the investing public until October 30, 2000, the Daimler defendants never intended such a union. Likewise, under Schrempp's leadership, DaimlerChrysler has found ways to shrink the number of former Chrysler executives in its governance structure and deny the Chrysler managers and senior executives who remained the opportunity to help bring about the growth and synergies expected from the combination. These are not the consequences of bad management or even management in the usual course, but of defendants' scheme to reel in Chrysler on the negotiating hook of a "merger of equals," to mislead Chrysler shareholders and DaimlerChrysler investors, and to fulfill defendants' plan from the outset to acquire Chrysler at a bargain price and subordinate it as one among many operating divisions of DaimlerChrysler. Additionally, prior to the Merger, Chrysler was very successful and its management team was envied and admired throughout the automotive industry. As DaimlerChrysler shifted control to Germany and eliminated the authority and decision-making- autonomy of Chrysler managers, Chrysler' s fortunes began to decline. To hide this reversal of fortune and its cause, DaimlerChrysler assured investors in late 1999 and the first half of 2000 that the Chrysler Group was on track to earn $5 billion in fiscal year 2000 (roughly what Chrysler earned in 1999). DaimlerChrysler executives knew that this was false since, at least as early as late 1999, they had been advised by Chrysler executives that even under the best case 4 scenario Chrysler's profits in 2000 would be substantially lower than in 1999. To conceal the plummeting performance as long as possible, DaimlerChrysler instructed that Chrysler ship its dealers additional inventory of 75,000 units during the first half of fiscal year 2000 so Chrysler could meet its sales and profit targets even though the dealers did not want or need the additional product. This borrowed sales from future quarters and allowed DaimlerChrysler to misleadingly report sales that were not there. When the true state of Chrysler Group became known to investors in late 2000, DaimlerChrysler stock declined to approximately $40 per share, or 50% from its high in 2000. 6. Lead plaintiffs Florida State Board of Administration, Policemen's Annuity and Benefit Fund of Chicago, Municipal Employees Annuity and Benefit Fund of Chicago and Denver Employees Retirement Plan, on behalf of the class defined herein, assert claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and under Sections 14(a), 10(b) and 20(a) of the Securities and Exchange Act of 1934, as set forth below. NATURE OF CLAIMS 7. This is a securities fraud class action brought on behalf of plaintiffs and the Class identified below in paragraph 124: (a) Plaintiffs Florida State Board of Administration, Policemen's Annuity and Benefit Fund of Chicago and Municipal Employees Annuity and Benefit Fund of Chicago bring Count I (Section 14(a) of the Securities and Exchange Act of 1934 ("the '34 Act"), 15 U.S.C. § 78n(a), and Rule l4a-9 promulgated thereunder, 17 C.F.R. § 240.14a-9)), Count II (Section 20 of the '34 Act, 15 U.S.C. § 78t(a)), Count III (Section I 1 of the Securities 5 Act of 1933 ("the '33 Act"), 15 U.S.C. §77k)), Count IV (Section 12(a)(2) of the '33 Act, 15 U.S.C. § 771(a)(2)), and Count V (Section 15 of the '33 Act, 15 U.S.C. § 77o) on their own behalf and on behalf of all persons who exchanged shares of Chrysler for shares of DaimlerChrysler in connection with the Merger. (b) All plaintiffs bring Count VI (Section 10(b) of the '34 Act, 15 U.S.C. § 78j(b) and Rule IOb-5 promulgated thereunder (17 C.F.R. § 240.IOb-5)) and Count VII (Section 20 of the '34 Act, 15 U.S.C. § 78t(a)) on their own behalf and on behalf of all other persons who purchased DaimlerChrysler ordinary shares, no par value (the "stock") from November 13, 1998 through November 17, 2000. JURISDICTION 8. This Court has jurisdiction over this action pursuant to Section 27 of the '34 Act, 15 U.S .C.