The big business news this morning is the acquisition of Chrysler from Daimler by Cerberus Capital Management:
FRANKFURT, Germany – German-based DaimlerChrysler said Monday it will sell almost all of money-losing Chrysler to a private equity firm for $7.4 billion, backing out of a troubled 1998 takeover aimed at creating a global automotive powerhouse.
Eighty percent of Chrysler Group, burdened by high pension and health costs and declining market share in the United States, will be sold to Cerberus Capital Management, which is taking a huge risk by agreeing to take on billions of dollars in pension and retiree health care costs at Chrysler.
Most of the reports I’ve read have been characterizing this as a bunch of outsiders horning in on the auto industry. Ain’t necessarily so. Remember that Cerberus purchased GMAC last year and it’s in the process of acquiring auto parts giant Delphi. The head of Cerberus’s automotive division is David Thursfield, former Ford exec, once head of the international operations that provided Ford’s cash cow for years while the domestic operations were in the red.
This is not precisely a surprise. There’s a re-print of an article from Automotic News here that should fill you in on what Cerberus might be thinking about doing with Chrysler.
Still, Daimler purchased Chrysler less than ten years ago for $36 billion so they’re taking quite a bath. Are they really doing that well?
And, while we’re on the subject, can someone explain to me how the execs at Daimler ever thought there’d be synergy between the two more than 100 year old companies? A century is a lot of time in which to establish incompatible corporate cultures, product lines, dealer networks, and who knows what else. It’s hard for me to come up with any comprehensible reasons for the original acquisition. Raiding Chrysler’s engineering? Acquiring its customer base? Getting access to its dealer base? I’ve worked for a German company (both in the U. S. and in Germany). The idea that there could be synergy between the two companies is absurd. What there would be is jealousy between the two engineering and design organizations, disdain on the part of the Germans for the American acquisition, and lack of mutual understanding of the differing corporate cultures, which pretty much looks to me like what happened. Couldn’t they have gotten pretty much all of the above a lot cheaper? I find it baffling.
Also, does anyone know who actually owns Cerberus?
Charon.