Cerberus Capital is buying Chrysler
By Tom Stundza -- Purchasing, 5/14/2007 8:20:00 AM
Private equity firm Cerberus Capital Management of New York, will invest $7.4 billion for an 80.1% equity interest in a restructured Chrysler company. The new company will produce and sell Chrysler, Dodge and Jeep motor vehicles, and the future Chrysler Financial Services firm that will provide financial services for these vehicles in the NAFTA region. DaimlerChrysler’s management board in Stuttgart, Germany, approved the sale this morning.
In a statement, John W. Snow, chairman of the New York investment company (and former U.S. Treasury secretary in the Bush administration), says “Cerberus will be a good home for Chrysler (and) believes in the inherent strength of U.S. manufacturing and of the U.S. auto industry. Most importantly, we believe in Chrysler." Snow continues that the private banker is aware that Chrysler faces significant challenges, but is confident that they can and will be overcome.
Cerberus has been a dark horse contender for Chrysler since April, but its bid emerged as the front-runner over the weekend, according to the Detroit Free Press, and beat out bids from Canadian auto supplier Magna International and private equity firm Blackstone Group. “A private investment firm like Cerberus will provide management with the opportunity to focus on their long-term plans rather than the pressures of short-term earnings expectations,” said Snow.
“We're confident that we've found the solution that will create the greatest overall value, both for Daimler and Chrysler,'' said Dieter Zetsche, chairman of the management board of DaimlerChrysler (which will change its name to Daimler). In a statement on the company’s media-only website, Zetsche says the Chrysler Group has made substantial progress in recent years.
His statement cites production hours per vehicle dropping from 48 hours in 2001 to just over 30 at present and product quality improving by more than 40% over the past six years. Since 2002, more than $10 billion has been invested in new production facilities and technologies, Zetsche says, and with 34 new models since 2001, Chrysler has one of the youngest product lines in the industry. “As a result, Chrysler today is structurally more sound than its North American-based competitors,” says Zetsche. “With Cerberus as a partner, Chrysler will have the best chances of utilizing its full potential.”
Ironically, Chrysler is recalling its 2005 Dodge Caravan and Chrysler Town and Country minivans to fix faulty air bags that may not deploy because of corrosion on the sensors. The recall involves more than 400,000 vehicles sold or registered in states that use large amounts of road salt.
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