Miscellaneous

Cerberus Pays $7.4 Billion For Majority Interest In Chrysler Group and CFS

By E L Eversman

PRESS RELEASE: Cerberus Takes Over Majority Interest In Chrysler Group and Related Financial Services Business for $7.4 Billion From DaimlerChrysler - Automotive News($)

So, Cerberus Capital Management has agreed to buy a controlling interest in Chrysler and Chrysler Financial Services. Let’s recap, shall we?

In 1998, Daimler-Benz paid $36 Billion for Chrysler under the leadership of JÜrgen Schremp. That transaction occurred when the dollar was strong, so $36 Billion really meant something.

Rather than miraculously having the Mercedes brand heal the traditional ills of Chrysler group products — pounding brakes, unreliable transmissions, electronic failures — Chrysler seemed to have infected Mercedes. For the first time, we began seeing significant product liability lawsuits against Mercedes. And they were entirely justified.

Not quite a decade later, the big “D” is bailing out, it’s leading products badly damaged in reputation and performance, without much to show for its good time. Cerberus is paying $7.4 Billion for slighly over an 80% share of Chrysler and CFS. That’s $28.6 Billion less than the big D paid with dollars of a higher value. The 2007 dollar is performing woefully against the Euro, so Cerberus’ 7.4B in today’s dollars is truly a tiny fraction of what the big D paid in 1998 for the privilege of owning Chrysler. Ouch.

By the way, isn’t Cerberus the three-headed dog who guards the entrance to the underworld to make certain none of the dead escape. Yeah, I thought so.

Full post as published by AutoMuse on May 14, 2007 (boomark / email).