German automaker DaimlerChrysler has announced that it is selling 80 percent of its struggling Chrysler division to Cerberus Capital, a private equity firm. Cerberus will pay $7.4 billion for the U.S.-based entity, but little of that money will go to Daimler.
In the transaction announced Monday morning, Daimler will actually end up paying to get out from under Chrysler's crushing liabilities. That predicament is a far cry from in the late 1990s, when Daimler's plans to go global led it to pay $36 billion to acquire Chrysler.
But now, nearly a decade after Daimler-Benz's historic "merger of equals" with Chrysler, the German-American marriage is essentially over.
It is not clear what Cerberus plans to do to rein in Chrysler's cost structure. But many analysts expect that what emerges will almost certainly be a smaller company.
"Their objective very clearly in private equity is making money," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. "It's not benevolence for dealers, or workers; it's making money, and they are going to try and do what's necessary to ensure that kind of financial return."
Cerberus may plan to get those returns by eliminating jobs and reducing retiree pensions, but it didn't announce any details of its future goals.
Such a plan would likely mean more pain for Detroit. But many analysts say such cuts are necessary if the U.S. automobile industry is to fend off growing competition.