On this day in 2007, the European-American carmaker DaimlerChrysler, created in 1998 in a $36 billion merger, announces that it is selling 80.1 percent of the Chrysler group to the U.S. private-equity firm Cerberus Capital Management.
Cerberus paid $7.4 billion in the deal, mostly in the form of investments in Chrysler; Daimler AG, as it was soon renamed, retained a 19.9 percent stake in the new company, known as Chrysler LLC. The sale marked the end of a troubled nine-year transatlantic relationship between Daimler-Benz, the German maker of the world-famous luxury automobile brand Mercedes-Benz, and the Chrysler Corporation, America’s third-largest car company. Though the much-buzzed-about merger, concluded in May 1998, had been touted as a pairing of equals, it was soon clear that it in fact amounted to a takeover by the German company. The end of Chrysler’s independence was a surprising twist after its near collapse in the 1970s and stunning comeback in the 1980s under the leadership of the former Ford executive Lee Iacocca.
The savings opportunity and marketing magic predicted for the DaimlerChrysler merger failed to materialize, however. Chrysler’s profits were up and down over the next several years, despite high expectations based on the past performance of its minivans and Jeeps. In 2006, according to The New York Times, Chrysler posted a $1.5 billion loss, despite the highly publicized release of 10 new models that year. The following February, DaimlerChrysler announced it was considering selling or restructuring the Chrysler division, including a proposed layoff of some 16 percent of its work force. Though it was reported at the time that General Motors Corp. had talked with DaimlerChrysler about acquiring the company, Cerberus was the eventual winner with its $7.4 billion bid.
Cerberus appointed Robert Nardelli, the former chief executive at Home Depot, as the CEO of Chrysler LLC, only days after the deal was concluded. By September 2008, Chrysler’s sales were down almost 33 percent amidst a growing global economic crisis that hit the auto industry especially hard. Both Chrysler and General Motors asked the federal government for loans to avoid bankruptcy. In mid-December 2008, Chrysler announced it was halting production at all 30 of its plants to reduce its inventory in line with the decrease in consumer demand. The following spring, Chrysler filed for federal bankruptcy protection; the company will enter into a partnership with the Italian automaker Fiat.
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