According to the deal, obligations for pensions and health care costs are to be retained by Chrysler Group companies. As someone would assume, the two companies announced that they’ll continue to work together on some vehicle projects –whatever that means… Surprisingly enough, disproving rumors that the United Auto Workers (UAW) would oppose any deals due to fears for job cuts, UAW’s president, Ron Gettelfinger backed the sale saying “The transaction with Cerberus is in the best interests of our UAW members, the Chrysler Group and Daimlerâ€. -Follow the jump for DaimlerChrysler’s full press release
PRESS RELEASE
Cerberus Takes Over Majority Interest in Chrysler Group and Related Financial Services Business for EUR 5.5 Billion ($7.4 billion) from DaimlerChrysler
Stuttgart, May 14, 2007
The Board of Management of DaimlerChrysler AG (stock-exchange abbreviation DCX) has today decided, subject to the approval of the Supervisory Board, on the future concept for the Chrysler Group and the realignment of DaimlerChrysler AG. Completion of the transaction is subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals and Cerberus financing arrangements.
Details will be explained at a press conference in
Structure of the transaction
Effects on key figures
The transaction will have the following effects on DaimlerChrysler AG:
Dr. Dieter Zetsche, Chairman of the Board of Management of DaimlerChrysler AG and Head of the Mercedes Car Group: "We’re confident that we’ve found the solution that will create the greatest overall value – both for Daimler and Chrysler . With this transaction, we have created the right conditions for a new start for Chrysler and Daimler."
Ron Gettelfinger, President of the United Autoworkers (UAW): "The transaction with Cerberus is in the best interests of our UAW members, the Chrysler Group and Daimler. We are pleased that this decision has been made. Because our members and the management can now focus entirely on the development and manufacture of quality products for the future of the Chrysler Group."
John W. Snow, Chairman of Cerberus Capital Management, L.P.: "We welcome Chrysler into the Cerberus family of companies and believe Cerberus will be a good home for Chrysler. Cerberus believes in the inherent strength of
Snow continued: "We would like to thank DaimlerChrysler for their good stewardship of this American icon over the last decade. We are aware that Chrysler faces significant challenges, but we are confident that they can and will be overcome. 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."
Business progress
In nearly ten years as DaimlerChrysler, a lot has been done to move the businesses forward. The synergies possible between Mercedes-Benz and Chrysler have been fully utilized. Additional potential for collaboration is limited between two businesses operating in such different market segments. The strong volatility and pressure on margins in the Chrysler Group’s North American core market have an increasingly negative impact on DaimlerChrysler’s overall profitability and share-price development.
The Chrysler Group has made substantial progress in recent years. For example, production hours per vehicle have fallen from 48 hours in 2001 to just over 30 at present. Quality has improved by more than 40% over the past six years. Since 2002, more than EUR 7.4 billion ($10 billion) has been invested in new production facilities and technologies. And with 34 new models since 2001, Chrysler has one of the youngest product lines in the industry.
Zetsche: "As a result, Chrysler today is structurally more sound than its North American based competitors. And with Cerberus as a partner, Chrysler will have the best chances of utilizing its full potential."
Ongoing collaboration
Existing projects with the Mercedes Car Group will be continued, for example in the development of conventional and alternative drive systems, purchasing, and sales and financial services outside the NAFTA region. Furthermore, a Joint Automotive Council will be established in which representatives of both sides will assess and decide on the potential of new and current projects. The Council will be led by board-level members from each company.
Zetsche: "We very much look forward to our continued cooperation as business partners, as we want to continue to reap the mutual benefits of working together. That’s one of the reasons why we’re retaining a 19.9% equity position in Chrysler."
New Daimler AG
Due to the new corporate structure, the name of DaimlerChrysler AG is to be changed to Daimler AG. A decision on this is to be taken by the shareholders at an Extraordinary Shareholders’ Meeting probably in fall 2007.
The Board of Management of the new company will be reduced to six members. Tom LaSorda, Eric Ridenour and Tom Sidlik will leave the Board of Management with the Group’s sincere thanks.
There will no longer be a separate board position for procurement in the new Daimler AG. In the future, all procurement activities will be directly coordinated between the divisions. Within the Board of Management, Bodo Uebber will additionally assume overall responsibility for procurement.
The leadership teams of the Mercedes Car Group, the Truck Group and Financial Services will remain unchanged, as will the teams in the vans and buses businesses.
Zetsche: "We’ve done our homework in our corporate functions and in all of our divisions. As a result of our strategic review, we have a well-defined roadmap to lead us into a good future."
The Mercedes Car Group will generate a return on sales of at least 7% this year, with higher rates to follow in the coming years.
The Truck Group will achieve an average return on sales of 7% over the cycle as of 2008. This represents a return on net assets of approximately 30%.
DaimlerChrysler is also a world leader and profitability benchmark for buses. And in the vans business, which is performing very well, the new Sprinter will continue the success story of its predecessor.
The Financial Services division aims to earn a return on equity of more than 14%.
Growth perspectives
Zetsche: "We have a strong starting position. We have an above-average financial power. And our future prospects are promising." The Group has defined the following main areas for continued growth:
By focusing on these three areas, Daimler’s full potential is to be exploited and enterprise value is to be increased further through profitable and sustainable growth. Daimler intends to do this on its own, while continuing to benefit from opportunities of scale with Chrysler.
Zetsche on Daimler’s goals: "We will be the leading manufacturer of premium products and a provider of premium services in every market segment we serve worldwide. And we will pursue our commitment to excellence based on a common culture, a great heritage of innovation and pioneering achievements and – with Mercedes-Benz – the strongest automotive brand in the world.
Cerberus Capital Management, L.P.,
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