Exit Daimler: Why German Firms Avoided the NYSE

Mercedes-Benz parent Daimler (DAI) announced this week it will drop its listing on the New York Stock Exchange, no doubt prompting a few discreet smiles at archrival BMW.

There's more to it than the usual Schadenfreude when either rival stubs its toe.

Daimler, which was then called Daimler-Benz, first listed itself on the Big Board in 1993. Richard Grasso, then head of the New York Stock Exchange, touted the move as a sign of the increasingly global economy, and the first of a coming wave of German companies. At the time of the announcement, I remember the streets were blocked off and there were elaborate displays of the global product range of Daimler-Benz outside the stock exchange, including a helicopter in addition to lots of beautiful cars.

(Grasso would later have his own public relations problems, when he was sued by then New York Attorney General Eliot Spitzer over Grasso's gigantic pay package. An additional note: A reader points out the suit against Grasso was ultimately dropped. As New York governor, we all know Spitzer had issues of his own, more recently.)

Anyway, the "wave" of Germans never showed, least of all the other German car companies. Volkswagen (VLKPY.PK)? Nope. BMW (BAMXY.PK0? Stayed away. Porsche considered an NYSE listing but ultimately dropped the idea. German companies had always avoided the NYSE because of stricter U.S. accounting standards.

I'm no accountant, but a significant difference as I understand it is that German accounting standards allow companies to "smooth" their earnings, in effect stashing away profits in good years that can be used to boost profits in poor years, as long as it all averages out.

With all due respect for BMW, for instance, one has to think there's a certain amount of smoothing going on when any car company can say, as BMW said at its annual shareholders meeting this week, that it has posted only one loss in 90 years. That was in 1999, connected with BMW's disastrous takeover of Britain's Rover Group.

Speaking of Schadenfreude, that was right after Daimler-Benz bought Chrysler and became DaimlerChrysler. That merger broke up in late 2007, and DaimlerChrysler reverted to just plain, "Daimler." The joke in the auto industry was, "How do you pronounce DaimlerChrysler? Answer: 'Daimler.' The "Chrysler' is silent."

Daimler's New York shares were never so high as when the company acquired Chrysler - except for when it ultimately dumped Chrysler. According to Daimler, fewer than 5 percent of its shareholders are based in the United States.

Judging by how Daimler eventually ended up undoing both the New York Stock Exchange listing and the DaimlerChrysler merger, BMW can discreetly pat itself on the back for staying off the Big Board and for staying independent all these years.

Chart: Daimler