formatting link
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.