Complain about a product or service

Daimler Completes Sale of Chrysler

August 3, 2007

The German automaker, which became DaimlerChrysler A.G., has unloaded its unprofitable U.S. venture, which never lived up to its goal of leveraging the German company's reputation for quality with Chrysler's extensive dealer network in the United States.

"It was an ill-fated partnership that didn't seem to make sense then or now," one analyst said. The company produced such trouble-prone models as the Dodge Durango and the Jeep Grand Cherokee.

Private equity firm Cerberus Capital Management LP has taken over 80.1 percent ownership of the Chrysler group and the German company DaimlerChrysler has retained 19.9 percent.

DaimlerChrysler will work with Cerberus to loan Chrysler's automotive business $2 billion in order to keep the automaker in business. DaimlerChrysler will provide $1.5 billion of the loan and Cerberus $500 million. A DaimlerChrysler statement characterized the loan as a strong sign of overall determination to make sure that Chrysler has a good start as a successful standalone car company.

DaimlerChrysler, however, has hedged its bet, retaining the right to sell the seven-year loan after the first year.

Chrysler, plagued with slumping sales and quality issues, is trying restructure its way to profitability after a $680 million loss last year. It hopes to cut 13,000 jobs in North America, build more fuel-efficient vehicles and step up sales outside the U.S.

The split comes as other automakers are ramping up development on a global scale. Ford, General Motors, Volkswagen, Peugeot Citroen and even Alfa Romeo are expanding rapidly into new markets, following the lead of such Asian manufacturers as Toyota, Honda and HyundaiKia.

Chrysler officials plan a celebration at the company headquarters in Auburn Hills, Michigan to mark the change -- though whether there's anything to celebrate remains to be seen.

"They can call it a celebration if they want. That's a term you hear more and more at funerals these days," a Wall Street analyst quipped.

Chrysler CEO Tom LaSorda said the newly-private company will bring a "laser-like focus" to its business, free of stock-market pressure to show short-term gains.

DaimlerChrysler will continue to be officially known as DaimlerChrysler until a shareholders meeting in Germany when the company name is likely to be changed to Daimler AG. The shareholders are to decide on the change at an extraordinary shareholders' meeting in Berlin on October 4, 2007.

Dr. Dieter Zetsche, Chairman of the Board of Management of DaimlerChrysler AG and head of the Mercedes Car Group said "Today marks a new chapter in the history of our company. Based on the clearly defined strategies in our Mercedes Car Group, Truck Group, Financial Services business divisions and for vans and buses, and our company's healthy balance sheet, we have every reason to move confidently into the future."

Report Your Experience
If you've had a bad experience -- or a good one -- with a consumer product or service, we'd like to hear about it. All complaints are reviewed by class action attorneys and are considered for publication on our site. Knowledge is power! Help spread the word. File your consumer report now.

Back to the top |