Kerkorian Bids for Chrysler - TheStreet

Updated from 1:54 p.m. EDT

After his failed bid to take control of the world's largest automaker,

General Motors

(GM) - Get Report

, billionaire investor Kirk Kerkorian has his sights set on another giant of the U.S. auto industry -- the Chrysler Group.

Jerome York, a representative for Kerkorian's investment firm, Tracinda Corp., sent a letter on Thursday to the board of Chrysler's German parent company,

DaimlerChrysler

( DCX), offering to pay $4.5 billion for the business.

"Tracinda believes its offer would permit DaimlerChrysler to dispose of Chrysler at an attractive price and enable DaimlerChrysler to focus on its operations," said York in the letter. "Tracinda also believes that the experience, expertise and financial strength Tracinda and its team bring to Chrysler will greatly benefit Chrysler's employees, suppliers and customers."

Shares of DaimlerChrysler recently were climbing $2.78, or 3.5%, to $83.34.

A Chrysler spokesman declined to comment on the letter, as did a spokesman for the parent company. DaimlerChrysler signaled that it would consider a sale of its underperforming Chrysler Group in early February, and the company's chairman, Dieter Zetsche, confirmed that it was in talks with potential buyers on Wednesday.

Among the rumored suitors were private-equity firm Cerberus Capital Management, a Blackstone Group and Centerbridge Capital team and auto-parts supplier

Magna International

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.

Tracinda offered to make a deposit of $100 million in order to conduct exclusive due diligence with Chrysler for 60 days, which wouldn't allow other would-be buyers access to the information.

If Tracinda decides to back out of its offer after the 60 days, it will forfeit $25 million to the company.

York said in the letter that Tracinda's offer would be subject to Chrysler reaching a new "satisfactory" collective bargaining agreement with the United Auto Workers. Negotiations on a new contract between Detroit's so-called Big Three automakers and organized labor are scheduled to begin this summer, and industry observers say the fate of the U.S. auto industry could rest on the outcome.

York also said the firm plans to build and strengthen the assets of Chrysler as an independent entity by partnering with the UAW and the company's senior management.

"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," the letter said.

York signaled that Tracinda would take a long-term approach to restructuring Chrysler. He advocated a product shift toward "greener" offerings, as well as an effort to boost product quality to the levels in order "to eliminate this as a bias in consumers minds towards purchasing Asian products."

Tracinda bought a stake in GM last year in an effort to overhaul the automaker in the face of growing competition from lower-cost competitors. York eventually joined GM's board, but he resigned last fall after its board of directors supported GM's CEO, Rick Wagoner, in his decision not to pursue a global partnership with Renault-Nissan. Tracinda later liquidated its stake in the company.

Kerkorian's bid for Chrysler marks a return for the billionaire investor, who was a major shareholder of the company before its controversial 1998 merger with Daimler-Benz. At the time, Daimler paid $35 billion for Chrysler in the deal, which was billed as a German-American combination that would become the world's most profitable auto company.

Shares of the combined company once surpassed the $100-mark amid the hype, but when losses began to mount at the Chrysler Group, the stock plummeted. Kerkorian accused the company in a lawsuit of misrepresenting the deal as a merger of equals, but he eventually lost his case.