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 Post subject: Daimler clinches Chrysler sale to Cerberus: source
PostPosted: Mon May 14, 2007 4:25 am 
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FRANKFURT (Reuters) - DaimlerChrysler (DCXGn.DE) has clinched a deal to sell a majority stake in its struggling Chrysler Group division Cerberus Capital Management, a person familiar with the situation told Reuters on Monday.

DaimlerChrysler will hold a news conference at 1200 GMT to announce the deal, two sources said.

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PostPosted: Mon May 14, 2007 7:46 am 
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Yup this is all over the place now! I don't know what to say yet (thinks downsizing)

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PostPosted: Mon May 14, 2007 10:04 am 
Here's an interesting paragraph from the WSJ report:

"The plan amounts to a massive bet by Cerberus that Chrysler can be turned around. Private-equity buyers typically acquire public companies or parts of them and take them private, seeking to refurbish them outside the public spotlight, in hopes of selling them later at a profit. In many private-equity deals, the buyer borrows against the company's assets or makes other financing deals to help ensure an acquisition pays off."
http://online.wsj.com/article/SB117913164108101758.html?mod=googlenews_wsj


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PostPosted: Mon May 14, 2007 10:16 am 
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I think any plan depends on being able to downsize the Union contracts - the Liability estimate was 19 Billion - it might take a bankruptcy to accomplish that - but a private equity buyer could accomplish that more easily than a real company.

the WSJ article says 18 Billion - add there's already a plan to cut 13,000 jobs - and quotes a union rep that said
"Cerberus would honor the union's collective bargaining agreement with Chrysler and there would be no job cuts"

it will be interesting to watch

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PostPosted: Mon May 14, 2007 10:28 am 
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In all the previous news and discussions about the sale of Chrysler, Jeep has been considered the crown jewel. I seriously doubt that jeep will see any major change except perhaps the cancellation of the commander that was already rumored. When the GM discussions were underway, many specualted that they only wanted Jeep and not the rest of Chrysler.

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PostPosted: Mon May 14, 2007 10:28 am 
Sounds like the Chrysler Financial arm will potentially take the big hit. Cerberus already owns GMAC, & could combine the duties of the two similar operations.


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PostPosted: Mon May 14, 2007 10:38 am 
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I've heard rumors prior to the annoucement that ChryslerFinancial would close... Don't know if this is linked to the sale, just something to ponder.

Jeep won't be affected model wise. Their current portfolio is the only saving grace right now with Chrysler. The Dodge Ram line, Dakota, Large Car might possibly be shrunk-ed to cut some losses as the economy and public switch to smaller, more effeceint vehicles.


Finally - the dust is settling on this chapter in history

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PostPosted: Mon May 14, 2007 1:34 pm 
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Here's some more info on the transaction for those interested....

DCX reaches deal with Cerberus
May 14, 2007
By TIM HIGGINS
FREE PRESS BUSINESS WRITER
UPDATED 5:48 A.M.:

In a deal to end nine unhappy years of marriage between Chrysler and Mercedes, DaimlerChrysler AG announced early this morning that it had picked private equity firm Cerberus Capital Management to take a majority ownership in the Auburn Hills-based automaker.

Cerberus, a New York City fund with several ties to the auto industry already, will pay $7.4 billion for an 80% stake in the maker of Chrysler, Dodge and Jeep brand vehicles.

DaimlerChrysler AG plans to change its name to Daimler AG, focus on its Mercedes luxury brand, and retain about 20% of Chrysler, the company announced.

“We're confident that we've found the solution that will create the greatest overall value – both for Daimler and Chrysler,” DaimlerChrysler chief executive Dieter Zetsche said in a statement this morning. “With this transaction, we have created the right conditions for a new start for Chrysler and Daimler.”

Of the $7.4 billion Cerberus is spending on the transaction, $5 billion will go into the newly created Chrysler Corp. LLC and $1.05 billion will go into Chrysler Financial Services “to strengthen the equity base of both businesses.”

Daimler will give the new Chrysler a $400 million loan.

Chrysler pension and health care liabilities will stay with Chrysler, DaimlerChrysler said.

Through the deal, Daimler will receive $1.35 billion.

The Cerberus bid, which emerged as the front-runner over the weekend, beats out bids from Canadian auto supplier Magna International Inc. and private equity firm Blackstone Group.

Kirk Kerkorian, who tried to buy Chrysler in the 1990s, also made a public bid of $4.5 billion in April but his offer was apparently frozen out because of his contentious past with DaimlerChrysler.

DaimlerChrysler's management board approved the deal with Cerberus today and it still requires the company's supervisory board, the equivalent to a U.S. company's board of directors, to sign off on it.

The deal also requires regulatory approval. DaimlerChrysler expects the deal to be finalized this fall.

In a surprising twist, DaimlerChrysler's announcement included a statement from UAW President Ron Gettelfinger showing support for the deal.

"The transaction with Cerberus is in the best interests of our UAW members, the Chrysler Group and Daimler," Gettelfinger said in the statement.

A member of DaimlerChrysler's supervisory board, Gettelfinger had argued in favor of keeping the company together.

DaimlerChrysler's announcement, made at 4:31 a.m., comes nine years after Daimler-Benz AG and Chrysler Corp. united at the cost of around $36 billion in what at the time was called a “marriage made in heaven.”

It was an uneven marriage to begin with between luxury car and mass-market car makers that never developed into a true meshing of synergies as promised.

German shareholders eventually grew unhappy, especially after Chrysler posted its losses in the third quarter of last year. In 2006 Chrysler's posted an operating loss of $1.5 billion, a number recently restated to $680 million because of accounting changes.

At the stockholders' annual meeting in Berlin last April, the message was clear: Divorce.

U.S. workers were shocked Feb. 14 when DaimlerChrysler chief executive Dieter Zetsche indicated that Chrysler might be for sale when he said all options were on the table for the Chrysler Group.

It came on the day when Chrysler was announcing its second major turnaround plan in the past decade, a plan that intended to cut jobs and production and reposition the company for growth.

The announcement ignited worldwide speculation about Chrysler and who would want to buy the unit that's known for making minivans, the Dodge Ram and Jeep Grand Cherokee.

Rumors and speculation swirled as DaimlerChrysler executives insisted on saying only that all options were on the table.

A new alliance with General Motors Corp. first popped up as a possibility.

As the Free Press reported earlier this year, the Detroit automaker had talks with DaimlerChrysler officials late last year and in January about the potential of a deal to take Chrysler off the Germans' hands in exchange for less than a 10% of stake in GM and Daimler's support of future health care liabilities.

DaimlerChrysler officials, however, figured they could get a better deal from the market, in particular private equity firms, which recently have been buying up struggling auto industry players.

Cerberus Capital Management, named after the mythical three-headed dog that guards the gates of Hades, is one of those private equity firms buying up auto businesses.

Last year it finalized a deal to take 51% of GMAC, General Motors' financing arm, and among its other holdings are banks, mortgage companies, property managers, Alamo and National rental car companies, more than 250 Burger King restaurants, the Fila shoe brand, Blue Bird school buses and the Rafaella clothing brand.

In Michigan, Cerberus has recently collected automotive assets beyond GMAC, including auto suppliers CTA Acoustics in Madison Heights and GDX Automotive in Farmington Hills.

It is also working to buy bankrupt Novi-based auto supplier Tower Automotive for $1 billion.

Most analysts agree that any buyer will need dramatic concessions from the UAW in order to make a deal work.

The unions have voiced their strong opposition to private equity firms in the auto business.

Canadian Auto Workers union President Buzz Hargrove has said he would opposes private equity firms.

The CAW voiced its lone support for Magna, saying it was the only potential bidder that would grow the company.

Before today, the UAW's Gettelfinger never said which of the bidders he preferred, rather he had consistently said he wanted to keep DaimlerChrysler together.

The UAW has already taken some blame from analysts for DaimlerChrysler's decision to sell Chrysler.

Zetsche has been vocal about his frustration with the UAW for not giving Chrysler the same kind of health care concessions it gave Ford Motor Co. and General Motors.

Gettelfinger has said the union was never presented with financial information that showed Chrysler was going lose money in 2006. DaimlerChrysler as a whole made $5 billion in net profit last year.

It's been estimated that the U.S. division has nearly $20 billion in pension and health care liabilities.

In March, Lehman Brothers analyst Brian Johnson said that the number of Chrysler job cuts could grow to 25,000 if a private equity firm buys Chrysler. Experts have said that any deal is likely to involve a bidder wanting health care concessions from the UAW.

Magna emerged in recent weeks as a perceived frontrunner among analysts in large part because the perception that organized labor would back a Magna offer.

The ace in Cerberus' hand appears to have been the hiring of former Chrysler Chief Operating Officer Wolfgang Bernhard as an adviser to help the deal.

Bernhard, who helped orchestrate the previous turnaround plan at Chrysler, has been seen around Chrysler's headquarters in Auburn Hills and seemed to be favored by Chrysler executives over other bidders.

http://www.freep.com/apps/pbcs.dll/a...ESS01/70514006

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PostPosted: Mon May 14, 2007 3:18 pm 
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trailpixie wrote:
In all the previous news and discussions about the sale of Chrysler, Jeep has been considered the crown jewel.


April sales figures support that -

Jeep® brand up 29 percent led by Jeep Wrangler and Jeep Patriot

“Driven by the continuously strong Jeep Wrangler and the new Jeep Patriot, sales for the Jeep brand were up significantly by 29 percent.”

Jeep Wrangler and Wrangler Unlimited posted sales of 10,776 units, up 75 percent compared to April 2006 with 6,154 units. The Jeep Patriot continued to gain momentum and finished April with sales of 2,904 units, up 38 percent from March 2007. The vehicle is one of Chrysler Group’s recently introduced fuel-efficient offerings that achieve 30 miles per gallon or better in highway driving.

Link to complete article: April Sales

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Last edited by priell3 on Mon May 14, 2007 3:54 pm, edited 1 time in total.

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PostPosted: Mon May 14, 2007 3:24 pm 
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Does anyone know if Jeep is a profitable brand overall? Or if its loosing money all the time like the rest of Chrysler?

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PostPosted: Mon May 14, 2007 3:38 pm 
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Jeep is profitable but not as an individual company... They use platform sharing / component sharing to reduce production costs.

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PostPosted: Mon May 14, 2007 5:32 pm 
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Not sure but with the right management Jeep could be profitable as a stand alone. Some things would need to be changed but it could happen. Have seen some behind the scene fiqures that look interesting.

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PostPosted: Mon May 14, 2007 6:58 pm 
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I thought CNN Money's comment was interesting

Quote:
On the negative side, the deal puts an embarrassingly low value on Chrysler. Forget the $7.4 billion dollar figure displayed prominently in the headlines.

Dig a little deeper and you realize that $5 billion represents Cerberus' capital infusion into the auto business and another $1 billion an infusion into the finance business. When all the bookkeeping is completed, Daimler will actually record a net cash outflow of $650 million to be rid of Chrysler.

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PostPosted: Mon May 14, 2007 8:54 pm 
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ATXKJ wrote:
I thought CNN Money's comment was interesting

Quote:
On the negative side, the deal puts an embarrassingly low value on Chrysler. Forget the $7.4 billion dollar figure displayed prominently in the headlines.

Dig a little deeper and you realize that $5 billion represents Cerberus' capital infusion into the auto business and another $1 billion an infusion into the finance business. When all the bookkeeping is completed, Daimler will actually record a net cash outflow of $650 million to be rid of Chrysler.

Man.....I wish I would have thought to buy Chrysler. Would have been an instant multi-millionaire ! :shock:

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 Post subject: bad marriage
PostPosted: Mon May 14, 2007 9:34 pm 
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If recall correctly, it wasn't that long ago the Chysler side was making money and the Mercedes side wasn't. IMHO the Daimler side totally mismanaged the merger from day 1. Going gets a little rough so ditch the stupid Americans. Too arogant to share platforms. Chrysler group got some suspension pieces and window switches. Oh yeah and the stupid cruise control on a stick.

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PostPosted: Tue May 15, 2007 7:40 am 
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Yes, but most agree that Chrysler would have been fine without Mercedes Benz from the begining so this merger was really doomed from day one. I'm pretty happy to see Chrysler as a true American owned car company again but only time will be able to reveal what happens next.

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PostPosted: Tue May 15, 2007 11:04 am 
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Based on Cerberus' history, they will turn Chrysler around and we'll see good things from the company. It may take a few years before the pipeline starts to show it, but it will happen.

Grumblings have always been that Daimler held Chrysler down and didn't let it do the things it did in the past.

Here is an example to think about. The PT was a design concept to bring people into the showrooms. A "halo" car for Plymouth. It's been selling over 100k units each year since it's introduction. Those are great numbers for a car that wasn't suppsoed to sell a lot and still doesn't have much advertising.

When Chyrsler doesn't have to worry about shareholders and a being stifled from bosses in Germany, it will soar again and Jeep will get even better.

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PostPosted: Tue May 15, 2007 7:41 pm 
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Quote:
Sounds like the Chrysler Financial arm will potentially take the big hit.
:shock:

Uh, oh. Hope it doesn't affect my loan.................

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PostPosted: Tue May 15, 2007 8:16 pm 
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QuestMan wrote:
Quote:
Sounds like the Chrysler Financial arm will potentially take the big hit.
:shock:

Uh, oh. Hope it doesn't affect my loan.................


Worst that would happen is your loan is sold to another company and you change the address you send your payment to every month. Terms, service, etc would remain the same.


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PostPosted: Tue May 15, 2007 8:23 pm 
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There was alot of interesting things today in the Toledo Blade of course, most interesting to me was the guy that will head it all up grew up in TOLEDO, hope he still supports his home town and Jeep!

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