STUTTGART: German-American automaker DaimlerChrysler has agreed the sale of its troubled North American division, Chrysler Group, to private equity firm Cerberus Capital Management.
The $7.4 billion (€5.4bn; £3.7bn) deal will give Cerberus an 80.1% stake in Chrysler, while the parent company will hold on to the rest of the shares and change its name to Daimler AG.
The sale, to be completed in the third quarter, will bring to an end the turbulent nine year romance of the Mercedes carmaker and Chrysler, Dodge and Jeep marques. The alliance never delivered the happy ending promised by its chief matchmaker, ex-Daimler chairman/ceo Jürgen Schrempp in 1998.
Chrysler's troubles mirror those of Detroit rivals General Motors and Ford Motor Company. It lost $633.3 million on revenue of $63.6bn during 2006.
The slump in demand and fierce competition from Japanese manufacturers drove Chrysler to announce earlier this year it was to cease production of its once top-selling pickup trucks and SUVs, resulting in factory closures and the loss of around 13,000 stateside jobs [WARC News: 15-Feb-07].
The publicity-shy Cerberus, which outbid Blackstone Group and Canuck auto parts supplier Magna International, has a reputation for sharp cost-cutting at its acquisitions and job losses could rise, in tandem with a reduction in the number of Chrysler dealers.
The hard-nosed New York-based firm has sought, however, to reassure Chrysler employees about its intentions: "Cerberus believes in the inherent strength of US manufacturing and of the US auto industry. Most importantly, we believe in Chrysler."
Data sourced from Wall Street Journal Online; additional content by WARC staff