Daimler agrees to give up remaining stake in Chrysler
Hot on the heels of the Chrysler's tentative deal with the UAW to cut the automaker's VEBA obligations, Daimler AG has announced it's finally reached an agreement to unload its remaining stake in Chrysler. According to Daimler's release, the company's 19.9% stake in Chrysler will be redeemed and Daimler write off a $1.5 billion loan which will help (if it can) avoid putting Chrysler into bankruptcy and facilitate the automaker's deal with Fiat. The agreement is likely to reduce Daimler's second-quarter earnings (before interest and taxes) by around $700 million, however, the German giant had already written down its stake in Chrysler last year. The agreement also includes Daimler paying $200 million into Chrysler's pension plans once the agreements are definitive, and another $200 million each year until 2011. All the gritty details are available in the press release below the fold.
[Image: Bill Pugliano/Getty]
PRESS RELEASE
US-Dollar Version: Daimler reaches agreement on separation from Chrysler
Agreement with US Pension Benefit Guaranty Corporation (PBGC), Chrysler and Cerberus on pending issues
Redemption of remaining 19.9% shareholding
Daimler AG (stock-exchange abbreviation DAI), Chrysler, Cerberus and the US Pension Benefit Guaranty Corporation (PBGC) signed a binding term sheet on April 27, 2009 covering issues still pending between the parties in connection with Chrysler.
Under this agreement, Daimler's remaining 19.9% shareholding in Chrysler will be redeemed and Daimler will forgive repayment of the loans extended to Chrysler, which were already written off in the 2008 financial statements.
In addition, Daimler has agreed to pay US $200 million into Chrysler's pension plans on the date of the execution of definitive agreements and in each of the next two years. In this way, Daimler is helping to secure pension payments to former employees of DaimlerChrysler. The existing pension guaranty of US $1 billion vis-à-vis the PBGC will be reduced to an amount of US $200 million and will remain in place until August 2012.
Chrysler and Cerberus waive any claims that might arise from representations and warranties made in the transaction of August 3, 2007, including the accusations made against Daimler in 2008 that Daimler allegedly improperly managed certain issues in the period between the signing of the agreement and the conclusion of the transaction. This also applies to the accusation that incomplete information was provided on the transaction.
Following the transfer of the term sheet into the final definitive agreements, the relationship between Daimler and Chrysler will solely consist of supplier-customer relations, including limited support for certain dealer financing until the end of September 2009, as well as certain guaranties.
The effect on EBIT resulting from this agreement, which will be reflected in Daimler's financial statements for the second quarter of 2009, is estimated at up to US $0.7 billion. The payments to be made in the years 2009 through 2011 amount to US $200 million per annum.
Reader Comments (Page 1 of 2)
Brent Schmidt 6:36PM (4/27/2009)
Dig that font that they're using now...
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izorro 6:40PM (4/27/2009)
about time really...They weren't doing anything productive.
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Jei 8:38AM (4/28/2009)
On the surface, Daimler severely mismanaged Chrysler. The started out wrong by misrepresenting their merger agreement with Chrysler Corp. and then allowing the auto giant to basically languish as foreign competition continued to strengthened.
I applaud Daimler, however, for allowing Chrysler to utilize some of its recent Mercedes-Benz platforms and components to create a couple of polarizing vehicles. I think, Daimler & Chrysler would have been better off just being "partners" in sharing development of platforms and future vehicles instead of merging.
Currently, Jeep's next Grand Cherokee rides on the existing ML platform. The GC benefits from some additional suspension options and more suburban-looking exterior. It's been rumored that Chrysler was working with M-B to develop the next series of platforms to underpin the next gen ML, GL, and R class vehicles. Hopefully, Chrysler will be able to equally benefit too.
summazooma 6:42PM (4/27/2009)
Is that Olds Intrigue in the background supposed to be the equivalent of a Raven or Black Cat, or something? I mean, is it an omen, the "ghost of American automotive icons past"?
Sad day today, all joking aside, with a brand that could have been a true import intender if evolved correctly.
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StickShift 7:42PM (4/27/2009)
Nice to see I'm not that only one who noticed that!
Yes, Olds could have been an Acura competitor. Instead they spent a fortune starting up Saturn while the middle lineup (Buick and Oldsmobile) slowly wilted. My didn't that work well. Ah well, so it goes.
davew 6:42PM (4/27/2009)
At this rate Chrysler has the same number of lines, Dodge, Chrysler, Jeep and ENVI as GM. Mopar is also probably going to be the only place left where you can get a real car, V-8, RWD, due to it being cheaper to sell the cars enthusiasts love and pay the CAFE fines than it would be to make everything a FWD four banger nightmare.
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Tricky dicky 6:48PM (4/27/2009)
a couple decades late but I'll take it. Sad thing is they don't have anyone to blame their results on from now on.
How do you say die in a fire in german.
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Harrison 10:07PM (4/27/2009)
Die bei einem Feuer.
caddy-v 7:04PM (4/27/2009)
Good bye Daimler, good ridence, don't let the door hit you in the ass on the way out. On second thought, I hope the door knob hits you right where the sun don't shine and sticks there for ever more.
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RegimeLife 7:51PM (4/27/2009)
Too bad Daimler isn't worried about going bankrupt with Chrysler is on the verge... no biggie though right? *rolls eyes*
Jon 11:51PM (4/27/2009)
Hopefully it's either Jüergen Schrempp's or Bob Eaton's posterior where said knob gets lodged. The sooner this nightmare in American business ends the better.
Frank 8:24AM (4/28/2009)
+1 Jon, +1.
Snix 7:12PM (4/27/2009)
A ray of hope, finally.
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Len_A 7:22PM (4/27/2009)
Chrysler's current problems are ALL Daimler's doing. Chrysler was a money-making machine when Daimler "merged" (took over) Chrysler. Aside from the decision to replace the LH bodies with the rear drive LX cars (300, Charger, and Magnum), Daimler did nothing except decimate Chrysler's product development. There's a big reason that Chrysler midsize sedans are front drivers spun off a Mitsubishi platform - that was all a part of "Neutron" Jurgen Schrempp's "Global" strategy, hat led to Daimler's takeover of Chrysler, a 37% stake and control (at that time) of Mitsubushi and a 10% stake in Hyundai. The Global Engine Manufacturing Alliance, in Dundee, MI, is a joint venture of Chrysler, Mitsubishi Motors, and Hyundai Motor Company, the only remaining sign of "Neutron" Jurgen's plans, plans that led Schrempp's sacking from Daimler's leadership.
All Daimler did was second guess every decision from Germany, and helped saddle Chrysler with enough undesirable product to tank the company.
Good riddance Daimler. Don't let the door hit you in the ass on the way out.
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oZ 8:40PM (4/27/2009)
And even then, Chrysler was going to go RWD + V8 with the LH successors even without Daimler's help. Witness the 300C HEMI concept, and the original Chrysler Nassau concept.
BigWill 8:54PM (4/27/2009)
Check your Chrysler history. Chrysler's problems didn't start with Daimler, they started with Bob Eaton. If there hadn't been a Bob Eaton, there wouldn't have been a Daimler-Chrysler.
Len_A 9:47PM (4/27/2009)
We can agree - Bob Eaton didn't help.
Shiftright 7:22PM (4/27/2009)
Daimler 'merges with an equal' 11 years ago that had cash in the bank , was quite profitable, and thanks to lean manufacturing processes had one of the quickest product development times in the industry. If I remember correctly, the latter was one of the attractions to Daimler. During the ensuing years, they suck all the profit and cash out of Chrysler while neglecting to fund any future product development. Thanks Daimler....I only wish they had a bigger stake in Chrysler still so they could lose more money.
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RegimeLife 8:00PM (4/27/2009)
You fail to mention that Daimler gave Chrysler the E-class and SLK-class platform upon which the 300 and Crossfire were built on. I seem to recall the 300 sold quite a bit...
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sebring96hbg 8:04PM (4/27/2009)
Yes, it was very nice of Daimler to unload a previous generation of components. It was either Goodwill or Chrysler. Hmmm... get a small tax write-off or charge confiscatory royalties for dated technology.
You make it sound like Daimler gave it freely. HAHAHAHAHAHAHA.
Mopar yields no quarter for Daimler apologists. What a load of schifezza.