May 14, 2007 Chrysler Group to Be Sold for $7.4 Billion By MARK LANDLER and MICHELINE MAYNARD
STUTTGART, Germany May 14 — DaimlerChrysler confirmed today that it would sell a controlling interest in its struggling Chrysler Group to Cerberus Capital Management of New York, a private equity firm that specializes in restructuring troubled companies. The price being paid is $7.4 billion, mostly in the form of capital that Cerberus will put into Chrysler.
The deal unwinds a 1998 merger that was meant to create a trans-Atlantic automotive powerhouse.
The agreement will leave DaimlerChrysler, of Stuttgart, Germany, with a 19.9 percent stake in Chrysler. DaimlerChrysler will change its name to Daimler AG. It will be freed of a great amount of pension and health care liabilities in the new Chrysler company.
Cerberus will take an 80.1 percent stake in the new company, to be known as Chrysler Holding.
With the deal, Chrysler becomes the first of the big Detroit automakers to be privately owned. The prospect of private ownership had alarmed Chrysler’s labor unions, which had come out strongly against the sale of the company, fearful that an investor might try to break up the company or seek deep cuts in wages and benefits. ...
A deal with Cerberus “puts an enormous amount of pressure on the union,” said David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.
The union thought private equity “would be the end of the world, and in some ways it probably would be,” Mr. Cole said. “The union is in a horrifying box right now. There’s got to be some real hardball that’s a part of this to get the rank and file to go along with it.” ...
As private equity firms have appeared more often in the headlines, they have also attracted scrutiny. Along with the unions, government officials have expressed increasing concern over the financial restructurings that are the lifeblood of buyout firms; their overhauls of companies have often included massive cuts in jobs or benefits. In countries like Germany and France, private equity firms have been derided as locusts that strip companies of their assets. ...
<http://www.nytimes.com/2007/05/14/automobiles/14cnd-chrysler.html?hp=&pagewanted=print>
Carl
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