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Chrysler Group to Be Sold for $7.4 Billion
NewsMax.com Wires Monday, May 14, 2007
FRANKFURT, Germany -- DaimlerChrysler AG will sell 80.1 percent of its
money-losing Chrysler Group to private equity firm Cerberus Capital
Management LP for $7.4 billion, the company announced Monday, undoing a 1998
merger aimed at creating a global auto giant.
The German-American automaker said in a statement that an affiliate of
Cerberus will hold the majority stake in a new Chrysler Holding LLC while
DaimlerChrysler will keep a 19.9 percent stake.
It said that Chrysler would keep its heavy obligations for pensions and
health care costs, a key issue complicating DaimlerChrysler's effort to sell
the division.
The first thing to go will be the company name, with Daimler AG to replace
DaimlerChrysler. A vote by shareholders to approve the change must be held
first, likely this fall, the company said.
"We're confident that we've found the solution that will create the greatest
overall value - both for Daimler and Chrysler," said DaimlerChrysler Chief
Executive Dieter Zetsche, who oversaw Chrysler before becoming CEO in 2006.
"With this transaction, we have created the right conditions for a new start
for Chrysler and Daimler."
He added that the two companies would still work together, particularly on
existing conventional and alternative drive systems, purchasing, sales and
financial services outside North America.
"We very much look forward to our continued cooperation as business
partners, as we want to continue to reap the mutual benefits of working
together," Zetsche said. "That's one of the reasons why we're retaining a
19.9 percent equity position in Chrysler."
DaimlerChrysler said the deal is likely to be complete by the third quarter
and that it would reduce its overall profit by some $4.05 billion to $5.39
billion for 2007.
The prospect of a sale to a private equity firm had worried unions in the
United States because of private equity firms' tendency to slash costs and
jobs. But United Auto Workers President Ron Gettelfinger called it the best
choice.
"The transaction with Cerberus is in the best interests of our UAW members,
the Chrysler Group and Daimler. We are pleased that this decision has been
made," he said.
Cerberus Chairman John W. Snow said the deal was a sign of faith in
Chrysler, an iconic American brand and third-largest U.S. carmaker behind
General Motors Corp. and Ford Motor Co.
"We welcome Chrysler into the Cerberus family of companies and believe
Cerberus will be a good home for Chrysler," he said in a statement. "Most
importantly, we believe in Chrysler."
Shareholders in Europe were excited about the news, sending the company's
stock up more than 7 percent to $87.66.
The sale comes after nearly three months of study and negotiations by
several companies interested in buying DaimlerChrysler's troubled U.S.
operations.
The deal is a stunning reversal of the 1998 $36 billion merger of Chrysler
with Daimler-Benz AG that tried to set the mold for global automotive
manufacturers. Despite the pledges and promises of synergies and economies
of scale, the two companies struggled to integrate.
As the company's stock price continued to disappoint, Zetsche announced Feb.
14 that all options were open for Chrysler, which lost $1.5 billion last
year and is undergoing a restructuring plan that will eventually shed 13,000
jobs.
Last year, GM sold a majority stake in its General Motors Acceptance Corp.
financing arm to a consortium of investors led by Cerberus for about $14
billion. Analysts had said buying a big stake in Chrysler would let Cerberus
combine GMAC operations with Chrysler Financial.
In December, Cerberus was part of a consortium of investors that said it
would invest $3.4 billion in the struggling auto parts giant Delphi Corp.
(DPHIQ) in exchange for new shares of Delphi stock as it emerged from
Chapter 11 bankruptcy protection.
On its Web site, Cerberus said the companies in which it has a controlling
or significant minority stakes generate over $60 billion in annual revenues.
Its worldwide investments include businesses involved in aerospace and
military, autos, building products, retailing, financial services, health
care, distribution, paper and packaging, real estate, telecommunications,
transportation and travel.
Billionaire investor Kirk Kerkorian, who tried to take control of Chrysler
in the 1990s, also has said he would make a bid, but it was apparently
spurned.
Chrysler Group to Be Sold for $7.4 Billion
NewsMax.com Wires Monday, May 14, 2007
FRANKFURT, Germany -- DaimlerChrysler AG will sell 80.1 percent of its
money-losing Chrysler Group to private equity firm Cerberus Capital
Management LP for $7.4 billion, the company announced Monday, undoing a 1998
merger aimed at creating a global auto giant.
The German-American automaker said in a statement that an affiliate of
Cerberus will hold the majority stake in a new Chrysler Holding LLC while
DaimlerChrysler will keep a 19.9 percent stake.
It said that Chrysler would keep its heavy obligations for pensions and
health care costs, a key issue complicating DaimlerChrysler's effort to sell
the division.
The first thing to go will be the company name, with Daimler AG to replace
DaimlerChrysler. A vote by shareholders to approve the change must be held
first, likely this fall, the company said.
"We're confident that we've found the solution that will create the greatest
overall value - both for Daimler and Chrysler," said DaimlerChrysler Chief
Executive Dieter Zetsche, who oversaw Chrysler before becoming CEO in 2006.
"With this transaction, we have created the right conditions for a new start
for Chrysler and Daimler."
He added that the two companies would still work together, particularly on
existing conventional and alternative drive systems, purchasing, sales and
financial services outside North America.
"We very much look forward to our continued cooperation as business
partners, as we want to continue to reap the mutual benefits of working
together," Zetsche said. "That's one of the reasons why we're retaining a
19.9 percent equity position in Chrysler."
DaimlerChrysler said the deal is likely to be complete by the third quarter
and that it would reduce its overall profit by some $4.05 billion to $5.39
billion for 2007.
The prospect of a sale to a private equity firm had worried unions in the
United States because of private equity firms' tendency to slash costs and
jobs. But United Auto Workers President Ron Gettelfinger called it the best
choice.
"The transaction with Cerberus is in the best interests of our UAW members,
the Chrysler Group and Daimler. We are pleased that this decision has been
made," he said.
Cerberus Chairman John W. Snow said the deal was a sign of faith in
Chrysler, an iconic American brand and third-largest U.S. carmaker behind
General Motors Corp. and Ford Motor Co.
"We welcome Chrysler into the Cerberus family of companies and believe
Cerberus will be a good home for Chrysler," he said in a statement. "Most
importantly, we believe in Chrysler."
Shareholders in Europe were excited about the news, sending the company's
stock up more than 7 percent to $87.66.
The sale comes after nearly three months of study and negotiations by
several companies interested in buying DaimlerChrysler's troubled U.S.
operations.
The deal is a stunning reversal of the 1998 $36 billion merger of Chrysler
with Daimler-Benz AG that tried to set the mold for global automotive
manufacturers. Despite the pledges and promises of synergies and economies
of scale, the two companies struggled to integrate.
As the company's stock price continued to disappoint, Zetsche announced Feb.
14 that all options were open for Chrysler, which lost $1.5 billion last
year and is undergoing a restructuring plan that will eventually shed 13,000
jobs.
Last year, GM sold a majority stake in its General Motors Acceptance Corp.
financing arm to a consortium of investors led by Cerberus for about $14
billion. Analysts had said buying a big stake in Chrysler would let Cerberus
combine GMAC operations with Chrysler Financial.
In December, Cerberus was part of a consortium of investors that said it
would invest $3.4 billion in the struggling auto parts giant Delphi Corp.
(DPHIQ) in exchange for new shares of Delphi stock as it emerged from
Chapter 11 bankruptcy protection.
On its Web site, Cerberus said the companies in which it has a controlling
or significant minority stakes generate over $60 billion in annual revenues.
Its worldwide investments include businesses involved in aerospace and
military, autos, building products, retailing, financial services, health
care, distribution, paper and packaging, real estate, telecommunications,
transportation and travel.
Billionaire investor Kirk Kerkorian, who tried to take control of Chrysler
in the 1990s, also has said he would make a bid, but it was apparently
spurned.