Cerberus takes control of Chrysler

Bradford Wernle
Automotive News
August 3, 2007 - 11:40 am
UPDATED: 8/3/2007 12:28 P.M.DETROIT -- It's official -- the 1998 transatlantic merger that was supposed to change the auto industry has ended.

Private equity firm Cerberus Capital Management LP took 80.1 percent ownership of the Chrysler group today. DaimlerChrysler retained 19.9 percent.

Citing "highly volatile U.S. credit markets," DaimlerChrysler said it would combine with Cerberus to loan Chrysler's automotive business $2 billion. Of that, DaimlerChrysler will provide $1.5 billion and Cerberus $500 million.

A DaimlerChrysler statement said the loan is "a strong sign of its overall determination to make sure that, under the majority of Cerberus, Chrysler has a good start as a successful standalone car company." Tom LaSorda remains CEO of Chrysler. Bodo Uebber takes over purchasing for the German automaker, as LaSorda, Eric Ridenour and Tom Sidlik leave the board of management. Chrysler officials plan a celebration on Monday, Aug. 6, at its headquarters in Auburn Hills, Mich., to mark the change. A 15-story blue "Get Ready" banner was raised on the headquarters building on Thursday, Aug. 2. DaimlerChrysler will continue to be known as DaimlerChrysler officially until a shareholders meeting Oct. 4 in Stuttgart. You may e-mail Bradford Wernle at bwernle@crain.com

PRESS RELEASE: DaimlerChrysler Closes Transaction on Transfer of Majority Interest in Chrysler to Cerberus
This is the press release issued by DaimlerChrysler:

PRESS RELEASE: DaimlerChrysler Closes Transaction on Transfer of Majority Interest in Chrysler to Cerberus

-- Dr. Dieter Zetsche, Chairman of the Board of Management of DaimlerChrysler AG and Head of Mercedes Car Group: "Today marks a new chapter in the history of our company."

-- Extraordinary Shareholders' Meeting to decide on change of name on October 4, 2007

STUTTGART, Germany -- DaimlerChrysler today completed the closing for the transfer of a majority interest in the Chrysler Group and for the related financial services business in NAFTA to a subsidiary of Cerberus Capital Management, L.P., a private- equity company based in New York. A subsidiary of Cerberus takes over 80.1% in the Chrysler Holding LLC, while DaimlerChrysler retains a 19.9% interest, as announced in May 2007.

The effects on the financial statements of DaimlerChrysler will be explained on August 29, 2007.

Basically, the conditions of the transaction and the economic effects have not changed since the agreement was signed on May 14, 2007. Furthermore, DaimlerChrysler and Cerberus have agreed to support the financing of the majority takeover of Chrysler by Cerberus in light of highly volatile US loan markets. Both companies will subscribe $2 billion of second lien debt for Chrysler's automotive business, to be drawn within 12 months. DaimlerChrysler's portion will be $1.5 billion. The debt will be priced at market conditions. One year after the closing, DaimlerChrysler has the right to sell this loan in the credit market. The maturity of this loan is 7 years.

DaimlerChrysler's financing support is a strong sign of its overall determination to make sure that, under the majority of Cerberus, Chrysler has a good start as a successful stand-alone car company.

As of today, the Board of Management of DaimlerChrysler AG is reduced to six members: Tom LaSorda, Eric Ridenour and Tom Sidlik are no longer members. Within the Board of Management, Bodo Uebber additionally assumes responsibility for procurement.

Due to the new corporate structure, DaimlerChrysler AG is to be renamed as Daimler AG. The shareholders are to decide on this change at an Extraordinary Shareholders' Meeting in Berlin on October 4, 2007.

Dr. Dieter Zetsche, Chairman of the Board of Management of DaimlerChrysler AG and Head of the Mercedes Car Group: "Today marks a new chapter in the history of our company. Based on the clearly defined strategies in our Mercedes Car Group, Truck Group, Financial Services business divisions and for vans and buses, and our company's healthy balance sheet, we have every reason to move confidently into the future."