Cerberus Now Set to Buy Chrysler

In a surprising reversal, Cerberus Capital Management appears to have won the bidding for Chrysler, pushing aside Magna International at the 11th hour, reports Forbes Online and The Wall Street Journal, as well as several other business publications. Magna has been the acknowledged front-runner for weeks in regard to purchasing Chrysler from Daimler, and so the news that Cerberus has emerged triumphant in the bidding process is somewhat of a stunner.

Daimler reportedly will make the public announcement tomorrow, confirming that Cerberus has won the bidding. They are expected to announce a substantial contribution to Chrysler’s $18 billion USD healthcare and pension liability as part of the deal, and that Tom LaSorda will stay on as Chrysler CEO. Cerberus advisor Wolfgang Bernhard is expected to be given a board seat in the new company.

If Cerberus pays Daimler an expected $5 billion USD for Chrysler and Daimler makes the aforementioned “substantial” contribution to Chrysler’s liability amount, the summing up is that Daimler is just making Chrysler go away at a fire-sale price. They are just giving Chrysler away to someone who can relieve them of the huge healthcare and pension liability that Chrysler brought to Daimler, and, they are paying part of that liability in order to get the deal done. By any reasonable calculations, this would have to rank as an ignominious end to one of the biggest deals of the past decade.

Daimler paid $36 billion in real cash money to acquire Chrysler in 1998.

No comment yet from the UAW, who can be assumed to be unhappy with Daimler’s choice of winner in the contest to own Chrysler.

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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6 Comments

  1. What an embarassment for Daimler. I’m sure they’re happy to see it go away, but, man, what they could have done with all that money they instead of throwing it at Chrylser.

  2. Good news: You won the bidding for Chrysler. Bad news: You won the bidding for Chrysler.

  3. They’ll pretty it up as much as possible and then sell it to a Chinese car company for a big profit.

  4. anonymous, the Chinese car company aren’t the only one who might eye Chrysler if Cerberus decide to sold Chrysler. Indians companies like Tata, Mahindra might keep an eye on the situation as well. Then we didn’t mentionned others car makers (Fiat, VW, Peugeot, GM, Renault-Nissan, Honda, BMW)

  5. Chrysler’s the one that got the shaft in this deal. The Germans did them no favors during their ownership period. And now the company is badly prepared for the future auto market. They would have been better off just staying independent even if it meant being a smaller company. Which is what they’re going to be now, anyway.

  6. I don’t know why Chrysler isn’t just allowed to die a natural death. Another couple years on a breathing tube isn’t going to make it a world-beater.

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