Chrysler sold to private equity for $7.4B
DETROIT — The divorce between Daimler and Chrysler is now a reality.
Once billed by both factions as a marriage made in heaven, the merger between auto giants Chrysler and German-based Daimler-Benz came to an end this past weekend, as private equity firm Cerberus Capital Management acquired 80.1 percent of struggling Chrysler and its related financial services business for $7.4 billion.
Daimler’s North American commercial truck and engine units — Detroit Diesel, Freightliner Trucks, and its subsidiaries Sterling and Western Star — are reportedly not part of the agreement.
As part of the transaction, Cerberus also agrees to take on billions of dollars in pension and retiree health care costs at Chrysler. The American company will still be responsible for paying out health care costs, however — a major factor in getting the deal done, reports Associate Press.
The deal marks the first time that a major U.S. automaker is under control of a private equity group.
Chief Executive Dieter Zetsche said in a statement that the two companies would still work together, particularly on existing conventional and alternative drive systems.
The United Auto Workers’ President Ron Gettelfinger was previously skeptical about a “strip and flip” sale to a private equity firm, which traditionally reorganize public companies and split them up privately for a profit. However, in a statement, he said the sell-off to Cerberus was the best possible deal that could have been made.
Canadian Auto Workers president Buzz Hargrove said he was assured that the collective bargaining agreement with Chrysler would be honored and that no jobs would be eliminated, according to AP.
Last week, Canada’s auto parts giant Magna International was thought to be the lead bidder for Chrysler, but was apparently outbid by Cerberus.
DaimlerChrysler said the deal is likely to be complete by the third quarter.
Meanwhile, across town, media reports suggest the Ford family is also considering selling off its majority share in the automaker.
— with files from Associate Press
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