Automaker DaimlerChrysler said on Tuesday talks to sell most of its New Venture Gear powertrain business to Magna International Inc were a first step and that it aimed to dispose of the rest later.
Canadian car-part maker Magna said on Monday it was in talks with DaimlerChrysler about buying a controlling stake in New Venture Gear, which in 2002 had sales of about $1.4 billion from its operations in Syracuse, New York, and Roitzsch in Germany.
The powertrain includes a vehicle's engine and gearbox and the axles that transfer power to the wheels.
"We are in talks about selling a controlling interest and what we are discussing at the moment is a joint venture," said a DaimlerChrysler spokesman in Detroit.
"Then at some point, maybe around 2007, we would look at the possibility of a next step," added the spokesman, noting this would be in line with the company's strategy of selling off its parts activities where it made sense.
Last year DaimlerChrysler became the full owner of New Venture Gear after fellow shareholder General Motors Corp exited the business, though GM bought a facility in Muncie, Indiana.
At 1558 GMT, DaimlerChrysler shares were down 1.6 percent, compared to a 1.1 percent decline by an index of its European peers.
"I appreciate this move to get rid of the business and get some cash for it," said Sal Oppenheim auto analyst Michael Raab.
"It seems that the first step would be for Magna to take a majority stake and a second step might be for it to take complete control."
U.S. carmakers GM and Ford Motor Co have in recent years spun off much of their parts activities through Delphi and Visteon.
Chrysler is doing the same, but in a more piecemeal way. The spokesman also said the powerful United Auto Workers union had agreed to the move as part of a broader accord earlier this year.
He declined to give a timeframe for an agreement and also said the company was still in talks with "a couple of suitors" about the sale of its Huntsville electronics plant in Alabama.
He confirmed that one of the possible buyers was German conglomerate Siemens.