As if the calamity going on right now in Detroit wasn’t enough for the Big Three to handle, Cerberus – the parent company of Chrysler LLC – has gotten into a bit of a shouting match with former Chrysler owner, Daimler. As you may recall, Cerberus is interested in acquiring the remaining 19.9 percent of Chrysler from Daimler, but apparently the two sides can’t even come close to an agreement at the negotiation table.
Daimler started the public dispute earlier on Wednesday when it released a statement regarding Cerberus’ handling of the negotiations. Daimler labeled Cerberus’ demands as “exaggerated,” indicating the investment firm wanted more than the $7.9 billion it paid for an 80.1 percent stake in Chrysler last year.
Not to be outdone, Cerberus released a statement shortly after explain why it was seeking so much from Daimler. Cerberus claims that Daimler breached its original contract while it had control of Chrysler by “misrepresentations relating to extraordinary changes in underwriting practices with regard to vehicle acquisition financing and leasing, as well as non-ordinary course lending and leasing practices.”
It doesn’t sound like the situation will be resolved anytime soon, but with Chrysler’s current financial situation, something has to give. The situation really comes down to the fact that Daimler values its share of Chrysler at zero and Cerberus needs Daimler’s stake in the Michigan automaker in order to sell all or part of Chrysler. It sounds to us like Daimler has the upper hand, so we fully expect Cerberus to tone down its demands in the coming months.
11/26, 5:24 PM
posted by:
mayer_ray_nagin
Do I have this right? Cerberus is demanding DAIMLER PAYS CERBERUS to take Chrysler off its hands?
LMFAO.
Not sure about the accounting on this, but if Daimler holds 20% of Chrysler it may need to record 20% of Chrysler’s loss on its books, so maybe it is worth it for Daimler to pay up. Given Chrysler’s losses Cerberus may have the upper hand.
11/26, 5:36 PM
posted by:
TOZO
Daimler just can’t do math: 20% of 0 is O!
11/26, 6:11 PM
posted by:
ochy38
cerberus wants daimler to pay? um..
11/26, 7:21 PM
posted by:
JakeK66
20% of a company who owes probably around 20billion is like 4 billion… See thats why they want Daimler to pay them.
11/26, 7:48 PM
posted by:
beemerdude
Mayer_Ray: No, that’s not what is going on. Cerberus wants to sell ALL of Chrysler to a third party, but they can’t do it until Dailmer sells Cerberus the 20 % that they (Daimler) still owns.
11/26, 7:53 PM
posted by:
johnnycanuck
I don’t know what any of this means so I’m just going to sit here and hum the theme to Hogan’s Heroes.
11/26, 8:40 PM
posted by:
bolex
LOL—johnnycanuck too funny!
11/26, 9:30 PM
posted by:
procrastinate now
Beemerdude, that’s close to what’s going on. Cerberus wants to sell all of Chrysler and they want Daimler to PAY Cerberus for the 20% Daimler still owns. That’s called creative accounting. Given that Daimler considers it’s remaining stake in Chrysler worth zero, that’s also called wishful thinking.
11/26, 10:07 PM
posted by:
Arbiter
So this would be the 19.9% thar Daimler has on the books as having “NO value” per the last accounting they gave the German government?
Offer ‘em 20 bucks and all the Crossfires still on the lots………….
11/27, 12:52 AM
posted by:
dmlgc
I think folks are missing the point,”20% of 0 is 0″.
But if you get a piece of the $25 billion bailout suddenly that 0 isn’t 0 anymore.
11/27, 3:11 AM
posted by:
sharpie
^^You are missing the point. When Chrysler is full depreciated, it is worth zero from an accounting point of view. If Daimler makes some money selling the remaining 20%, it should then be reported as capital gain after the sale goes through.
Whether Chrysler gets the $25 million bailout has no effect of the zero accounting value. It will only affect the book if Daimler makes a sales, and logically with a higher price tag, resulting in bigger capital gain on Daimler’s book. So no, the 0 is still a 0.
11/27, 11:38 PM
posted by:
nowei
I think the key here is that DAIMLER VALUES Chrysler at zero. As I understand it, Cerberus is basically arguing that Daimler is currently overvaluing Chrysler (even at zero), and more importantly also did so in the past.
It’s kind of like buying a television at Costco. Assume Costco sells you a television they say is worth $2000, and you pay it. You get it home only to find out that it’s a $500 television that doesn’t even work (and maybe also destroyed your TiVo somehow). At this point, you take the television back to Costco in search of a refund because Costco essentially misrepresented the product they sold you.
That’s arguably an oversimplification, but the basic principles are the same. And I’m not necessarily siding with Cerberus, just trying to clarify their position.