Chrysler Group President Tom W. LaSorda, Cerberus Capital Management Chairman John W. Snow and DaimlerChrysler CEO Dieter Zetsche at today's announcement of the sale of Chrysler Group to the private-equity company.
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DaimlerChrysler announced the Cerberus deal this morning. An affiliate of Cerberus will acquire 80.1% of Chrysler, while DaimlerChrysler will retain 19.9%.
Most of the $7.45 billion outlay from Cerberus will go directly to the future new company, Chrysler Holding. Chrysler's automotive business will get $5 billion, while the financial-services business gets $1.05 billion. DaimlerChrysler will receive the balance of $1.35 billion. In addition, DaimlerChrysler will loan $400 million to the Chrysler automotive operation.
DaimlerChrysler will transfer the unit free of debt. Because of the cost of Chrysler's restructuring plan, the transaction will result in a cash outflow of $1.6 billion for DaimlerChrysler. DaimlerChrysler's net cash outflow resulting from the transaction will be $650 million.
Chrysler's pension and health-care obligations will be retained by the Chrysler companies.
"We're confident that we've found the solution that will create the greatest overall value -- both for Daimler and Chrysler," DaimlerChrysler Chairman Dieter Zetsche said in a prepared statement. "With this transaction, we have created the right conditions for a new start for Chrysler and Daimler."
"We will be the leading manufacturer of premium vehicles and a provider of premium services in every market segment we serve worldwide," Mr. Zetsche said.
UAW President Ron Gettelfinger said, "The transaction with Cerberus is in the best interests of our UAW members, the Chrysler Group and Daimler."
The transaction is expected to close during the third quarter of this year.
Former Chrysler Chief Operating Officer Wolfgang Bernhard will not take an active role in helping to restructure Chrysler, Cerberus said.
"He will not join the management team at Chrysler," Chairman John Snow told a news conference. Mr. Bernhard had advised Cerberus on its purchase of a majority stake in Chrysler.
Mr. Bernhard, a highly respected manager within the industry, ran the Volkswagen brand group until the end of January.
The effect of a sale on Omnicom Group, which in 2006 generated 3.6% or $410 million in revenue from the automaker, is unclear. Chrysler is Omnicom's largest client; the automaker utilizes the work of more than 100 of the holding company's agencies. Omnicom shops have worked with DaimlerChrysler units since 1926, when Chrysler hired ad agency Ross Roy (now folded into BBDO). After Daimler bought Chrysler Corp. in 1998, the Chrysler Group consolidated at Omnicom in 2000.
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Amy Wilson is a reporter for Automotive News. Bradley Johnson contributed to this story, with additional reports from Reuters.