Just as DaimlerChrysler (NYSE:DCX) is getting ready to let Chrysler go out on its own -- whether through a private equity route or with a GM-type suitor, they get hit with a recall. Mind you, not a small recall, but nearly a half a million cars and SUVs. This is the equivalent of being dressed and ready for the prom and then having your pants split in the seat after the first dance. Uncomfortable, annoying, and embarrassing.

The recall encompasses several models from the Jeep Liberty, the Dodge Durango, and the new Dodge Avenger. The latter's name is exactly what's happening to poor old Chrysler. The costs of the recall of course are borne entirely by Daimler, and the dealers must follow up with customers to ensure compliance. All in all, it's one giant pain in the Benz.

Daimler has not quantified the dollar amount involved in this recall and, at the end of the day, it ends up being a rounding error to Daimler's earnings number. Nonetheless, a significant cost it is. The rule of thumb as told to me by a car dealer a few years ago, a "typical, minor" recall costs the manufacturer about $150 per auto, when factoring in labor cost and materials. The dealers love recalls, as it guarantees to keep all the mechanics busy, and no one can blame the dealer or mechanics for the error. For once, customer and mechanic are on the same side.

If the $150 cost per recalled vehicle is consistent, Daimler is facing about a $75 million expenditure, but the timing could not be worse.

Georges Yared is the author of Stop Losing Money Today and Baby Boomer Investing. Please visit www.georgesyared.com

Chrysler's big pain in the Benz originally appeared on BloggingStocks on Sat, 10 Mar 2007 17:10:00 EST. Please see our terms for use of feeds.

Note: The Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Volatility Index S&P 500 Options-VIX down .07 to 10.15.

General Motors-(NYSE:GM) option implied volatility increases to 37: Dow Jones says "GM in talks to purchase Chrysler." General Motors is recently down .41 to $36.02. Dow Jones reported "GM in talks to purchase Chrysler Group." GM call option volume of 22,023 contracts compares to put volume of 43,510 contracts. General Motors March option implied volatility of 35 is below its 26-week average of 40 according to Track Data, suggesting decreasing price risks.

DaimlerChrysler-(NYSE:DCX) option implied volatility Spikes on Dow Jones report on GM. DaimlerChrysler is recently up $2.69 to $72.85. Dow Jones reported: "General Motors in talks to purchase Chrysler Group." DCX call option volume of 24,099 contracts compares to put volume of 5,947 contracts. DaimlerChrysler March option implied volatility of 31 is above a level from 22 yesterday and above its 26-week average of 25 according to Track Data, suggesting larger price risks.

Option volume leaders today were: Google (NASDAQ:GOOG), Best Buy (NYSE: BBY), Apple, Inc. (NYSE:AAPL) and Microsoft (NASDAQ:MSFT).

Daily Option Update - February 16, 2007 originally appeared on BloggingStocks on Fri, 16 Feb 2007 14:00:00 EST. Please see our terms for use of feeds.