UPDATE 1-Daimler stock gains on Chrysler spinoff speculation

FRANKFURT, Feb 14 (Reuters) - Shares in DaimlerChrysler DCXGn.DE rose as much as 2.1 percent on Wednesday to their highest point in a year on speculation the world's fifth-biggest carmaker could spin off or sell loss-making U.S. arm Chrysler. German newspapers Handelsblatt and Frankfurter Allgemeine Zeitung (FAZ) reported that Chief Executive Dieter Zetsche would announce at a news conference in Detroit that he had hired an investment bank to review strategic options for the group. The FAZ quoted a manager close to the company as saying maintaining the status quo was the least likely outcome.

"A divorce on earth will follow the marriage made in heaven," he was quoted as saying, referring to the 1998 merger of Daimler-Benz and Chrysler that never achieved its potential.

Zetsche will also lay out clear margin targets for each business, the FAZ said, citing company sources.

Zetsche would tell the annual results news conference starting at 1430 GMT that he was looking into all options, including a partial or complete sale of Chrysler, Handelsblatt said, citing supervisory board sources.

"Everything is possible," one person familiar with the matter told Handelsblatt. It was "more likely that something drastic will happen than that nothing will happen".

DaimlerChrysler stock touched a session high of 50.25 euros and was up 1.5 percent at 50 euros by 1046 GMT while the DJ Stoxx European car sector index .SXAP gained 0.9 percent.

"It is (action on) Chrysler, which is long overdue," one Frankfurt trader said of the price rise.

The stock has outperformed the index by around 1 percent this year and trades at around 13.5 times 2007 earnings per share, a premium to BMW (BMWG.DE) on 11 times but lagging fellow turnaround play Volkswagen (VOWG.DE) on nearly 15 times 2007 EPS.