Cerberus pays $7.4 billion for 80.1 percent of Chrysler
Tuesday, May 15, 2007
DETROIT -- Chrysler's 80,000 workers may pay the price for German-based parent DaimlerChrysler's decision Monday to turn over the keys of its U.S. car company to private equity firm Cerberus Capital Management for $7.4 billion.
Talks begin soon between the United Auto Workers and Detroit's car makers on a national contract and analysts expect Cerberus, headed by former Treasury Secretary John Snow, to push for radical changes at its money-losing Chrysler, Jeep and Dodge operations.
The announcement sent shudders through much of Chrysler's work force, despite assurances from Chrysler CEO Tom LaSorda that there are no major plans under discussion with Cerberus to cut jobs beyond a previously announced restructuring plan.
That wasn't good enough for Canadian Auto Workers President Buzz Hargrove. He said he had "enormous concerns," noting that many private equity groups have a long-standing history of "job cuts as opposed to job creation."
The sale of 80.1 percent of Chrysler to Cerberus Capital Management LP unwinds the messy $36 billion 1998 marriage that was set up to create a global automotive powerhouse.
Instead, the maker of the upscale Mercedes Benz brand of cars found itself, like competitors Ford and General Motors, battered by rising pension and retiree health costs in the United States as Toyota and other Asian manufacturers won the hearts of U.S. consumers with what many view as more reliable, fuel-efficient models.
Germany-based DaimlerChrysler AG said it would keep a 19.1 percent stake in the renamed Chrysler Holdings LLC. The private company will be run by Cerberus, which said it would keep the present management in place.
Car buyers have little to fear from the transaction, according to one industry analyst.
"From a consumer perspective, in the practical sense, there's no real downside. I think consumers are pretty well protected," said Jeremy Anwyl, president of the Edmunds.com automotive Web site.