$7.4 billion sale of Chrysler to Cerberus

Chrysler CEO Tom LaSorda and DCX CEO Dieter Zetsche went to Auburn Hills for a meeting that will discuss the selling of the $7.4 billion sale of Chrysler to Cerberus Capital Management, a private-equity firm. This will dissolve the 1998 merger which was given high hopes but failed to live up to expectations of the company and the spectators.



The German auto maker said a 19.9 percent stake in the Auburn Hills automaker will still be retained. Eighty point one (80.1) percent of the new company will be owned by Cerberus. The new company will be named Chrysler Holding LLC.



Most of Cerberus's payment will be appropriated to Chrysler's auto-making operations. For its financial services operations, $1 billion has been allotted.





The Detroit News reported that under the terms of the deal, DaimlerChrysler will pay Chrysler's debts and Cerberus will have the responsibility on its other liabilities such as pension and healthcare.



In Stuttgart, Germany, DaimlerChrysler CEO Dieter Zetsche said they were assured by Cerberus Capital Management that they have found the solution that will create the greatest overall value both for Daimler and Chrysler. He further said such transactions have created the right atmosphere for a fresh start for Chrysler and Daimler. He also explained he thought Chrysler had a better chance of rising up its business under private-equity ownership, protected from the pressure of analysts and investors focused on the returns in the short-run.

In an email sent by Zetsche to Chrysler employees, it was stated that doing such has been difficult for him, given his experience with and commitment to Chrysler. Zetsche lead the U.S. car maker for almost five years.



Under the new owners, Tom LaSorda, Chrysler's current CEO, will resume to lead the company.



Under the terms and conditions of the deal, Cerberus will give $1.3 billion to DaimlerChrysler as payment. However, Cerberus anticipates paying additional $650 million in cash. This is to cover partly Chrysler's cash requirements until the transaction is over sometime in the months of July to September.



Daimler-Benz it would change its Daimler AG. It has an estimated 8 percent shares. This was in early trading in Frankfurt and on relief that DaimlerChrysler was not paying more to dispose off Chrysler and that it had molted the liabilities on pension and healthcare. DaimlerChrysler said pension liabilities are over-funded but the healthcare liabilities amounted to $18 billion.



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