Daimler pays to dump Chrysler

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Daimler pays to dump Chrysler > German automaker will end up actually paying $650 million to unload Chrysler > to end its exposure to billions in ongoing losses, healthcare costs. > By Chris Isidore, CNNMoney.com senior writer > May 14 2007: 11:53 AM EDT > > NEW YORK (CNNMoney.com) -- DaimlerChrysler moved to undo the most expensive > and one of the least successful mergers in auto industry history Monday as it > agreed to essentially pay to dump the money-losing Chrysler unit which it > paid $37 billion for nine years ago. > DaimlerChrysler (Charts) announced it will sell an 80 percent stake in its > U.S. brand to Cerberus Capital Management, a private equity investment firm > that will pay $7.4 billion. > > DaimlerChrysler sells majority stake of its struggling U.S. brand for $7.4 > billion to Cerberus Capital, a New York-based private equity group. > > Former Treasury Secretary John Snow is the current Chairman of Cerberus > Capital. > > The Chrysler plant in Newark, Del., one of the assembly lines that it plans > to shut in an effort to cut capacity and stem losses. > But the German automaker, which will be renamed simply Daimler, will not > actually get most of the money that Cerberus is paying for the once proud > automaker. Instead Cerberus will contribute $5 billion to the Chrysler auto > operations it will now control, with just over another $1 billion going to > Chrysler's finance arm. > While Daimler will receive the remaining $1.4 billion of Cerberus' capital > contribution to the sale, Daimler expects to have to cover another $1.6 > billion in Chrysler losses before the deal closes. So Daimler estimates that > it will end up paying out about $650 million to close the deal, and that its > earnings for 2007 will take a $4 billion to $5.4 billion profit hit due to > charges related to the transaction. > Crucial cars for Chrysler > What Daimler gains from the deal is closing the door on ongoing losses and > liability for future health care costs, for Chrysler's unionized employees > and retirees, estimated to be as high as $18 billion.
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