Is Daimler Exiting Chrysler While They Still Can?
May 6th, 2009 | by admin |
Matthew C. Keegan asked:
The Daimler-Chrysler merger that took place in 1998 was one for the history books. What was then known as Daimler-Benz AG purchased Chrysler Corporation, America’s third largest automaker, for $37 billion. That merger, which later was revealed to be an acquisition of the American company by the German automaker, was one of the largest of its kind, but it also was doomed to failure.
Cultural classes and disgruntled shareholders on both sides of the Atlantic ensured that the newly minted DaimlerChrysler corporation would eventually fail. Mistrust, mismanagement, and likely a misallocation of resources put the relationship in grave danger, a business partnership that came to a halt in late 2007 when Daimler sold Chrysler to Cerberus Capital Management for a huge loss.
Cerberus to the Rescue
Cerberus purchased 80.1% of the Chrysler Group, paying just $7.4 billion for their share, promptly renaming the company Chrysler LLC and taking it private. The remaining 19.9% of Chrysler was still held by the new Daimler AG, but now that company wants to dispose of its remaining interested in the automaker.
To this day, Chrysler remains a drain on Daimler’s books, to the tune of costing the company $548 million in profits in the second quarter of 2008 alone. With this latest loss, Daimler has announced that they plan on selling its remaining shares to Cerberus, a move that will likely take place in the next few weeks.
3 Reasons Why Daimler Wants Out
Besides its most recent quarterly loss, Daimler likely wants to sever its relationship with Chrysler as soon as possible and for the following reasons:
Chrysler’s long term success is not assured. Despite the federal government’s loan assistance package which will benefit Chrysler, the company may not have enough funds to survive long term. Daimler’s stake in the company was worth about $1.85 billion when the break up took place and the company wants to recoup those funds.
Daimler needs the cash. The global automotive market is feeling the strain of tough times and reduced demand. Like all automakers, Daimler is bleeding through cash and likely could use an infusion of the same right now.
Daimler wants to move on. As long as Daimler owns a share of Chrysler, then the American company will continue to rely on its German friends to provide engineering and technical assistance. Daimler has learned just how much of a drag that Chrysler has been on the company and is eager to move forward without having to look back.
Daimler Wants to be Fairly Compensated
Daimler is insisting that Cerberus pay the going rate for the remaining shares of Chrysler and may get what they want. The company also wants to be compensated by Chrysler for the marketing assistance the company provides in Europe, leverage Daimler will use to get what they want.
Once Daimler sells its minority stake in Chrysler to Cerberus, an important chapter of automotive history will close. DaimlerChrysler will go down as one of the worst business arrangements of all time, something business professors will cite in case studies for generations to come.
Annette
The Daimler-Chrysler merger that took place in 1998 was one for the history books. What was then known as Daimler-Benz AG purchased Chrysler Corporation, America’s third largest automaker, for $37 billion. That merger, which later was revealed to be an acquisition of the American company by the German automaker, was one of the largest of its kind, but it also was doomed to failure.
Cultural classes and disgruntled shareholders on both sides of the Atlantic ensured that the newly minted DaimlerChrysler corporation would eventually fail. Mistrust, mismanagement, and likely a misallocation of resources put the relationship in grave danger, a business partnership that came to a halt in late 2007 when Daimler sold Chrysler to Cerberus Capital Management for a huge loss.
Cerberus to the Rescue
Cerberus purchased 80.1% of the Chrysler Group, paying just $7.4 billion for their share, promptly renaming the company Chrysler LLC and taking it private. The remaining 19.9% of Chrysler was still held by the new Daimler AG, but now that company wants to dispose of its remaining interested in the automaker.
To this day, Chrysler remains a drain on Daimler’s books, to the tune of costing the company $548 million in profits in the second quarter of 2008 alone. With this latest loss, Daimler has announced that they plan on selling its remaining shares to Cerberus, a move that will likely take place in the next few weeks.
3 Reasons Why Daimler Wants Out
Besides its most recent quarterly loss, Daimler likely wants to sever its relationship with Chrysler as soon as possible and for the following reasons:
Chrysler’s long term success is not assured. Despite the federal government’s loan assistance package which will benefit Chrysler, the company may not have enough funds to survive long term. Daimler’s stake in the company was worth about $1.85 billion when the break up took place and the company wants to recoup those funds.
Daimler needs the cash. The global automotive market is feeling the strain of tough times and reduced demand. Like all automakers, Daimler is bleeding through cash and likely could use an infusion of the same right now.
Daimler wants to move on. As long as Daimler owns a share of Chrysler, then the American company will continue to rely on its German friends to provide engineering and technical assistance. Daimler has learned just how much of a drag that Chrysler has been on the company and is eager to move forward without having to look back.
Daimler Wants to be Fairly Compensated
Daimler is insisting that Cerberus pay the going rate for the remaining shares of Chrysler and may get what they want. The company also wants to be compensated by Chrysler for the marketing assistance the company provides in Europe, leverage Daimler will use to get what they want.
Once Daimler sells its minority stake in Chrysler to Cerberus, an important chapter of automotive history will close. DaimlerChrysler will go down as one of the worst business arrangements of all time, something business professors will cite in case studies for generations to come.
Annette
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