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Daimler to Sell Bulk of Chrysler to Equity Group

DaimlerChrysler agreed to sell the majority stake of its Chrysler Group, the third-largest car manufacturer in the United States, for $7.4 billion Monday to private equity firm Cerberus Capital Management. Two journalists discuss the deal's impact on the carmaker's future.

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  • MARGARET WARNER:

    In 1998, the $36 billion merger between Germany's Daimler-Benz and Detroit's Chrysler looked like a dream corporate marriage.

  • JURGEN SCHREMPP, Chair, Daimler-Benz:

    Today, we are creating the world's leading automotive company for the 21st century, DaimlerChrysler.

  • ROBERT EATON, Chair, Chrysler Corporation:

    We believe this is just the beginning. We are leading a new trend that we believe will change the future and the face of this industry.

  • MARGARET WARNER:

    But today it's the face of DaimlerChrysler that's changing, as Daimler announced it is selling off money-losing Chrysler to a New York private equity firm, Cerberus Capital Management, for $7.4 billion. DaimlerChrysler chief executive Dieter Zetsche spoke to reporters in Stuttgart, Germany.

  • DIETER ZETSCHE, CEO, DaimlerChrysler:

    With this transaction, we have created the right conditions for a new start for Daimler and Chrysler.

  • MARGARET WARNER:

    Cerberus chairman John Snow, a former U.S. treasury secretary, said his firm is committed to returning Chrysler to profitability.

  • JOHN SNOW, Chair, Cerberus Capital Management:

    We think as you do that, at this particular point, at this particular point in Chrysler's history, there may be opportunities in the private sector, the private world, the world of private investment, that create more room for growth and expansion, that allow management to focus with greater intensity on the day-to-day business of producing better cars.

  • MARGARET WARNER:

    Under the deal, Cerberus takes over 80 percent of Chrysler, as well as roughly $19 billion in pension and health care liabilities for Chrysler workers. Daimler will retain a 20 percent share in Chrysler.

    Founded in 1925, Chrysler was long one of America's big three automakers, along with General Motors and Ford. But despite its popular Dodge and Jeep brands, it lost $1.5 billion last year and slipped to fourth in U.S. sales, behind Toyota. In February, it announced a restructuring plan that will shed 13,000 jobs.

    Cerberus, founded in 1992, today has $25 billion in private capital assets under management. It specializes in buying and turning around distressed companies. It currently owns some 50 of them, ranging from Air Canada to Formica Corporation. Last year, Cerberus bought GMAC, the financial arm of General Motors.

    United Auto Worker union leaders had objected to selling Chrysler to a private equity firm, but over the weekend, the American UAW reversed course. UAW President Ron Gettelfinger spoke to reporters today in Detroit.

  • RON GETTELFINGER, President, UAW:

    You're dealt a hand. Now we maintained — and I would still maintain today — that we would prefer that the Chrysler Group stay under the umbrella of Daimler, but that's not going to happen.

  • MARGARET WARNER:

    Gettelfinger said he hoped Cerberus would pump an infusion of capital into Chrysler and would honor labor agreements made with the union.

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