Chrysler Is Sold to Cerberus
DaimlerChrysler (soon to be Daimler) has announced this morning that they have sold Chrysler to Cerberus Capital Management of New York, a large private-equity firm for $7.4 billion.
After lots of people did the math this morning on Wall Street, they’ve all come to the conclusion, that despite Daimler’s best efforts to hide it, Daimler has actually PAID Cerberus approximately $650 million to take Chrysler. So after paying $36 billion to acquire (laughably called a “merger” at the time) Chrysler in 1998, DaimlerChrysler has actually paid someone to make it go away. But, Daimler got rid of approximately $18 billion in healthcare and pension liabilities, which has to count for something. The new owner now has that millstone around its neck.
Over at Breakingview.com, Hugo Dixon took note of the rise in DaimlerChrysler’s stock price this morning (2.8% so far) and said that “if you have to pay to get rid of a business and shareholders still cheer, that really rams home how bad a business you had.”
Mark Warnsman, an analyst from Prudential Equity Group, summed up the transaction this way: “Daimler expects to realize relatively little from the sale beyond its ability to draw a line under what has been perceived as a nine-year misadventure,” he wrote in a research note Monday.The overwhelming sentiment among industry analysts and stock analysts is, however, relief that DaimlerChrysler got out as easily as it did – the feeling is that it could have been worse.
Somewhat surprisingly, Ron Gettlefinger, the president of the UAW, said that the deal “was in the best interests of our UAW members, the Chrysler Group and Daimler”. The UAW previously stated its opposition to any sale to a private-equity group, fearing that it would be asked for considerable concessions by the new owner.
What a tawdry end to the DaimlerChrysler relationship. Its embarassing for Daimler, humiliating for Chrysler. To Cerberus, it’s a variation on the old joke; the good news/bad news joke. They’re not even going to know exactly what they “won” for sometime until they start flipping over all the rocks there at Chrysler and letting all the snakes (production costs, lack of future product, actual losses on all those sales to rental firms, etc.) slither out.
And you have to believe the UAW is just playing possum at this point. This should be fascinating to watch as it plays out.I hope Chrysler makes it – the automotive landscape wouldn’t be the same without them.