Chrysler a U.S. firm again as Cerberus takes control
In its deal with Daimler, the private equity firm hopes that it can restore the struggling company.
DETROIT - Chrysler became an American company again yesterday as Cerberus Capital Management of New York gained a controlling share from Chrysler's German owners and started on the long road to restoring the 82-year-old automaker's luster - and profits.
DaimlerChrysler AG transferred an 80.1 percent stake in Chrysler to Cerberus, one of the world's largest private equity firms, in a $7.4 billion deal. The German automaker retained a 19.9 percent interest in the new company, Chrysler L.L.C.
"After months of uncertainty, then a period of transition, we are beginning a new chapter in Chrysler's proud history - and we have the chance to write a terrific story," Chrysler chief executive officer Tom LaSorda said in an e-mail to employees.
With the closing, Chrysler becomes the first U.S. automaker in private hands since Ford Motor Co. went public in 1956. German automaker DaimlerBenz AG bought Chrysler Corp. on Nov. 12, 1998.
Chrysler - which plans a companywide celebration Monday- will be free of the short-term quarterly earnings pressures that public companies face.
"Going private means we can bring laser-like focus to our business and make the long-term investments needed to compete," LaSorda said.
DaimlerChrysler shares will become Daimler shares, but otherwise shareholders won't be affected. DaimlerChrysler is to be renamed Daimler AG, a change that must be approved by shareholders at a meeting Oct. 4 in Berlin.
In a letter to employees, Daimler chairman and former Chrysler chief Dieter Zetsche said the company made the right decision.
"As a company, we've become faster and overall more efficient," he said. "Our balance sheet is strong."
The sale ends the stormy nine-year marriage of Daimler and Chrysler, which merged in a $33 billion deal that was hailed as creating a global giant.
Instead, Daimler found itself battered by rising pension and retiree health costs in the United States, while its Mercedes brand faltered with quality problems at home.
Chrysler had a profit of $1.8 billion in 2005, but it lost $618 million in 2006. The losses brought on the sale, and forced Chrysler to announce a plan to shed 13,000 hourly and salaried jobs in the United States and Canada by 2009.
Jim McTevia, a Detroit restructuring consultant, said Chrysler was in a precarious position before the deal.
"I really believe that, had this not taken place, Chrysler would have ultimately been sold off in pieces," he said. "I do think now that Chrysler has a very bright future."
McTevia said Cerberus can bankroll Chrysler's restructuring, and help the automaker find new business overseas, where it has struggled.