Sale of Chrysler will cost DCX $673m

In the history of big business, few mergers and takeovers can hold a candle to the $36 billion "merger of equals" that Daimler pulled off in 1998. When the dust settled, DCX stock was up in the stratosphere, and German executives were hailed as conquering heroes. Only nine years later, the folks from Stuttgart were so anxious to dump the albatross that was Chrysler, that they paid Cerberus $673 million to take the legacy cost-laden automaker off their hands. Sure, the initial reports stated that Cerberus had to pay $7.4 billion for the right to own the Pentastar, but all that money went directly to the Chrysler brand, which Cerberus will own as of July.

If it seems like Daimler lost out huge, take the following into consideration. First, the Benz boys rid themselves of over $18 billion in future pension costs, which is a monumental amount of money for any company to have hanging around their neck. Second, Daimler retains 19% ownership of the Chrysler Group, which means Daimler can continue to achieve economies of scale on technologies like diesel engines. Third, and perhaps most importantly, DCX stock spikes have catapulted the market value of the German automaker by a staggering $27.7 billion.

Of course Cerberus basically got a free, multinational corporation whose assets are probably still worth more than its considerable liabilities. Plus, a looming showdown with the UAW could result in some relief from the monumental legacy costs that scared off Daimler in the first place. We're with the Detroit News on this one, it looks like a win for both companies. Now lets hope that Cerberus knows some designers that know how to make good-looking interiors.

[Source: Detroit News]

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