It's official: Cerberus gains control of Chrysler
DETROIT -- Private equity firm Cerberus Capital Management took control of Chrysler on Friday, less than six months after its German parent, DaimlerChrysler dcx, said it was looking to sell the U.S. automaker.
"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 CEO Tom LaSorda told employees in an e-mail.
The 82-year-old automaker's new status as a private company "means we can bring a laser-like focus to our business and make the long-term investments needed to compete, free from financial market pressures to generate short-term results," he said.
In May, DaimlerChrysler announced it would sell 80.1% of Chrysler to Cerberus, ending a nine-year marriage that failed to live up to expectations. Daimler will keep the rest.
The deal was heavily skewed in Cerberus' favor: Of the $7.1 billion it paid to DaimlerChrysler, $6.05 billion was reinvested in Chrysler. The remaining $1.35 billion came back to Cerberus when DaimlerChrysler paid off the automaker's debt.
DaimlerChrysler planned to sell that debt to outside investors, but couldn't. So the debt will remain on Daimler's books.
DaimlerChrysler is keeping its name until October, when it holds a special shareholder meeting to change its name back to Daimler.
Daimler CEO Dieter Zetsche said the automaker is returning to its focus on premium cars, like its Mercedes brand, and the new name "will both connect us to our past and signal the launch of a new era."
Daimler paid $36 billion for Chrysler in 1998, on hopes the two automakers together would save billions in production and manufacturing costs. But that never happened. Executives at Mercedes worked hard to keep operations separate, to prevent mass-market brand Chrysler from sullying Mercedes' image.
Cerberus, founded in 1992, is based in New York and is run by financier Stephen Feinberg. John Snow, Treasury secretary from 2003 to last June and former head of railroad CSX, was named chairman of Cerberus in October.
In July, Snow said Cerberus plans to let current Chrysler management continue with its restructuring plan. "In many ways, we're like a coach crafting a winning team out of bright prospects that lacked only the right equipment and guidance to succeed," he said.
Chrysler LLC, as the new company will be called, said it would hold a celebration for employees Monday and will be rolling out a "New Chrysler" campaign through the rest of the year. Chrysler also plans to unveil a new logo, an updated version of the old five-sided star, on Monday.
Former Chrysler executive Wolfgang Bernhard, a senior adviser to Cerberus, was expected to be named chairman of the board of directors of Chrysler Holding. Chrysler Chief Executive Tom LaSorda was to continue to run the company's day-to-day operations.
Chrysler made $1.8 billion in 2005 but lost $618 million in 2006 and $1.98 billion before interest and taxes in the first quarter this year. DaimlerChrysler didn't report second-quarter earnings for Chrysler because of the impending sale.
The losses brought on the sale and forced Chrysler to announce a restructuring plan that will use buyouts and early retirement offers to shed 13,000 hourly and salaried jobs in the U.S. and Canada by 2009.
Combined Chrysler, Dodge and Jeep sales were down 2.3% overall in the first seven months of 2007, according to Autodata. Jeep was a bright spot, with a 12% increase in sales thanks to the new Jeep Compass crossover and Jeep Patriot, a small sport-utility vehicle. Chrysler may get a boost this month when it introduces the redesigned 2008 Dodge Caravan and Chrysler Town & Country minivans.
Cerberus has agreed to take on most of the auto company's approximately $18 billion in long-term retiree health care costs.