A new Chrysler emerged Friday as DaimlerChrysler AG of Germany completed a 7.4-billion-dollar deal to sell its American branch to private equity firm Cerberus Capital Management.
The uncoupling of Daimler and Chrysler spelled the end of the fabled “marriage of equals” that was supposed to create a company with a broad product line, better able to withstand global competition.
After a troubled nine-year merger with its German parent, Chrysler once again is in American hands.
The “new” Chrysler, or Chrysler LLC, which is the official name for the Auburn Hills, Michigan-based company, is the first major North American automotive manufacturer in more than a half century to be privately owned, company officials said.
“With the transaction complete, we can now focus all of our efforts on our day-to-day business by moving faster, quickly reacting to customer needs and bringing out industry-leading products,” Tom LaSorda, president and chief executive, said.
“We have support from two solid partners — Cerberus and Daimler — which will give us the strong financial backing and the resources we need to fuel the long-term success of this great company,” he said.
Chrysler sputtered a year ago when its inventory of unsold vehicles bulged, setting the stage for a 1.48-billion-dollar loss.
Under pressure from shareholders in Europe, DaimlerChrysler's German management began a review of Chrysler in October and decided to put the company up for sale.
In May, Cerberus submitted a winning, 7.4-million-dollar bid for an 80.1 percent stake in Chrysler.
Chrysler officials said the conditions of the transaction and the economic effects have not changed since the agreement was signed in May.
However, DaimlerChrysler and Cerberus have agreed to new financing arrangements to complete the deal. Investors had declined to purchase bonds that were supposed to help finance the deal. The debt offering was pulled from the market, Chrysler officials have acknowledged privately.
Both companies will underwrite two billion dollars' worth of debt for Chrysler's automotive business, to be drawn within 12 months.
DaimlerChrysler's portion will be 1.5 billion dollars, said spokesman Han Tjian.
Under the terms of the agreement, the debt will be priced at market conditions. One year after the closing, DaimlerChrysler has the right to sell the loan in the credit market.
The maturity of the loan is seven years, according to officials from DaimlerChrysler, which plans to change its name to Daimler AG at a shareholders meeting in October.
“DaimlerChrysler's financing support is a strong sign of its overall determination to make sure that, under the majority of Cerberus, Chrysler has a good start as a successful stand-alone car company,” DaimlerChrysler AG said in a statement announcing the deal.
One of the first items on Chrysler's agenda is negotiations with the United Auto Workers union. Chrysler is expected to get health-care concessions comparable to those the UAW gave General Motors and Ford in 2005.
However, Harley Shaiken, a labor expert at the University of California, said he does not expect Cerberus to attempt to make dramatic changes in the company's labor contract with the UAW.
Cerberus is being guided by executives with broad experience in the auto industry such as Wolfgang Bernhard, a former executive at both DaimlerChrysler and Volkswagen AG, who is expected to become Chrysler's chairman.
“These are still going to be tough negotiations. But I don't expect Ceberus to come in and turn things on their head,” he said.
The response from Chrysler employees has been mixed.
Several employees have said they are suspicious of Cerberus's motives. Others, however, have said it could mean a fresh start for Chrysler.
“The year before the merger, this place was rocking,” said one longtime Chrysler employee recently. “We had a product line nobody could touch.”
