We've already reported on the forthcoming sale of Chrysler to Cerberus Capital Management, but until now, all the cited reports were mum on price. The New York Times has that figure and it's a cool $7.4 billion. A press conference to announce the deal is expected in about three hours, at 8 AM EST.
According to the NYT, Cerberus will take an 80.1-percent chunk of Chrysler, while DCX holds on to the remaining 19.9-percent. That fifth of the company will be held under a new company called Chrysler Holding LLC and privately owned – a first for a Detroit automaker. Additionally, Chrysler will be bought as a debt-free entity, with the new owners only being responsible for the $18 billion in health care liabilities and pension.
DCX's shareholders and the board have approved the sale, with UAW head Ron Gettelfinger saying that this is in the "best interests of our UAW members, the Chrysler group and Daimler." That last part, "Daimler" is only part of the company's new name; it will now simply be known as Daimler AG.
Details of the financial breakdown include Cerberus' investment of $5 billion in the automaker itself, while a little over $1 billion will go towards Chrysler's financial wing. $1.45 billion will go to Daimler directly, although its expected that the now freed automaker will reinvest $600 million back into Chrysler.
The entire deal is expected to close by the third quarter of this year. In the meantime, watch this space for more.
[Source: New York Times]
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Reader Comments (Page 1 of 3)
kingvolcano @ May 14th 2007 6:31AM
Funny how all these companies run by ex government big shots have the money to buy up anything they want. OK folks, it's time to follow the money. Cerberus meet Carlyle Group. Let's see how many government contracts the new Chrysler will get.
John @ May 14th 2007 7:40AM
#1
Cerberus...The 3 headed hound of Hades AND a government connection?
Coincidence? I think not.
dougjp @ May 14th 2007 8:16AM
Magna is brilliant, they got their Russian investment and aren't saddled with this.
George @ May 14th 2007 8:57AM
What can I say when Lee Iacocca says it all in 'Where Have All the Leaders Gone?'
SWAT LAX @ May 14th 2007 9:24AM
So now that "DCX" is dead as a way to refer to Chrysler cars, we need a new term to roll of the tongue like GM and FoMoCo.
Since the new little brother in Auburn Hills (New York?) is named "Chrysler Holding LLC," I think we need to work "Ho" into the name.
1st attempt: CryHoLc - pronounced Cry-Hoe-Lick
I'm sure someone else can do better.
Brooksie @ May 14th 2007 9:26AM
How about...wait for it....Chryberus
PeterB @ May 14th 2007 9:30AM
Mopar seems to have worked for um, 40 or so years.
Not exactly what I had planned for my favorite nameplate, but lets hope they run it better than the Germans did.
Who will Mercedes get to shift all its losses over onto to make itself seem profitable now?
Oh yeah, Smart.
Ian @ May 14th 2007 9:34AM
I don't follow your posting.
19.9% will be held by Daimler and that's 1/5th the company and that 1/5th will be held by a Private Comany???
Sureely you mean that Cerberus and Daimler will for a company called Chrysler Holding LLC of which Cerberus owns 80.1% and a Public German company Daimler owns the remaining 19.9%
ALso all this means nowt. The real financial meat is what happens to the $18-19 Billion Liability for Chrysler Pensions and Healthcare. Who is holding that bag?
Ian @ May 14th 2007 9:38AM
Also will Daimler's 19.9% be held by them as a long term passive holding? I am reminded that the Chrysler 300C and the range that followed has been a very good succes. But the secret here was they used an enlarged Mercedes 300E Platform, transmission and suspension. It seems that Mercedes hated doing this and commented to the effect "never again". Thus will Daimler/Mercedes continue to allow some of their technology to be used in this fashion, or is Chrysler now technologically fully divorced?
Brad @ May 14th 2007 9:48AM
#7, I agree. As much I didn't really want to ever see Chrysler sold to someone else, Daimler left them with no choice. They came in and gutted Chrysler and are now disposing of the carcas.
George M. @ May 14th 2007 10:53AM
Let me clarify this post. 80.1% of Chrysler will be held by Cerebus as Chrysler Holdings LLC. 19.9% will remain with Daimler AG. The 80.1% ownership will make Chrysler the largest privately owned automaker.
Venture capitalist NEVER take long term positions. This is a move to free Chrysler of its liabilities. Think something similiar to what Nicolas Smolenski of TVR did. Sucks to be an autoworker now, at least greater unemployment will reduce inflation....
Kumar @ May 14th 2007 11:02AM
Better yet, lets see how long the unions last now that it's a privately run firm in charge...
It looks like they paid just enough to declare bankruptcy and start over with fresh non union workers.
Tool @ May 14th 2007 11:47AM
I just read that Wolfgang Bernhard--who the NY Times said was Cerberus ace in the hand in getting this deal--will not be part of Chrysler management.
WTF?
Ian @ May 14th 2007 11:49AM
The deal in a nutshell: No ifs ands or buts....
Daimler gives away 80.1% of Chyrsler in return for
1) Cerberus taking the pension/health Liabilites OFF of Daimler's balance sheet
2) Cerberus injecting new cash of $7.4 Billion into it's new business
We have no way of knowing what deal Cerberus has, or will have, with the UAW, but there is a "material change of ownership" here so one has got to think that the "Pensions and Healthcare benefits" will be "realigned" in some fashion. Pretty obviously Daimler was not able to achieve this, but the change of ownership probably can.
So Daimler gets relief from that Liability. But all they money they spent buying 100% of Chrysler and all the money invested over the last decade leaves them with 19.9% of the company. Oooops.
quandmeme @ May 14th 2007 11:53AM
I was looking forward to the smart. Seems like 20% interest wouldn't be enough to keep something like that going. Are there other partnerships like that that will be affected by the split.
Frank @ May 14th 2007 12:03PM
9. Also will Daimler's 19.9% be held by them as a long term passive holding? I am reminded that the Chrysler 300C and the range that followed has been a very good succes. But the secret here was they used an enlarged Mercedes 300E Platform, transmission and suspension. It seems that Mercedes hated doing this and commented to the effect "never again". Thus will Daimler/Mercedes continue to allow some of their technology to be used in this fashion, or is Chrysler now technologically fully divorced?
Posted at 9:38AM on May 14th 2007 by Ian
The 300C uses a only the steering column and etectronic architecture of the E-class. Everything else including the trans has been heavily modified. You can not interchange parts between the two. Daimler wanted to do this. Chrysler already had plans to go rear wheel drive and had the parts ready (read the Tom Gale interview in a recent issue of Motor Trend) but Daimler made them take the Mercedes parts and charged Chrysler money for using it! This delayed the program by up to two years (2003 would have been the intro date, not 2005). The later stories about Mercedes not being happy about sharing parts with Chrysler came from Dieter and others wanting to truly unify the the two companies when it came to the stuff you don't see - like engines, trannies, electronics, etc. - exactly what you would expect from two merging automakers, sharing parts and technologies to save costs, the whole reason this so-called merger was supposed to be about.
The other posters are right, Daimler has done a terrible job with Chrysler and never allowed the "merger" to achieve its goals. They simply do not know how to run a global enterprise that makes everything form mass market vehicles to high end exclusive vehicles. Look at what they've done with Smart.
why not the LS2LS7? @ May 14th 2007 12:21PM
There's no way a private equity group has the resources to stick out what Chrysler didn't have alone and Mercedes didn't have either.
They'll be begging for government money/bailout in 5 years, 10 at the outside.
Did Jeep come back home with Chrysler or did Mercedes keep it?
Frank @ May 14th 2007 12:23PM
Biggest lie in print that I have seen in a long time...
"We would like to thank DaimlerChrysler for their good stewardship of this American icon over the last decade,” Snow,Cerberus’ chairman said.
http://www.freep.com/apps/pbcs.dll/article?AID=/20070514/BUSINESS01/70514009
Brad @ May 14th 2007 12:35PM
#13, even though Bernhard might not be named as part of management right now, I can guarantee that he will have a huge part in running this company from behind the scenes.
Mr. Oak @ May 14th 2007 12:41PM
This is too funny. The piece below is the screen name of some that posts on another website:
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UAW - U Aint Workin
Indianapolis, IN