The deal is done. Cerberus has bought the Chrysler Group for $7.4 billion ending what seems to be only Act One of the drama that has enveloped the Chrysler Group. Today's news that Cerberus has bought DCX's troubled Chrysler Group has put the UAW and CAW into bunker mode, employees on edge and upset what seemed to be the predetermined outcome; a Magna takeover.
Cerberus paid $7.4 billion for 80.1 percent of Chrysler, Daimler will continue to own the remaining 19.9 percent. The new company will be called Chrysler Holding LLC. Daimler will transfer the unit to the new holding company free of debt, a move which will cost Daimler more than $1.6 billion but the new Chrysler holding company will still be responsible for its pension and health care obligations, Automotive News reported.
Cerberus, perhaps best known for rapid growth in recent years, is a hedge firm that specializes in acquiring distressed companies and instituting drastic measures to make them profitable again. The fund led the group which acquired a 51 percent stake in GMAC from General Motors last year. Its experience in running an automotive company such as Chrysler is nonexistent although they have hired Wolfgang Bernhard, Chrysler's president between 2001-2004.
More importantly, it was one of the lead financiers of Delphi's bankruptcy and demanded another round of steep concessions from the UAW which has put Delphi and the autoworkers union on the warpath towards a strike. The UAW/CAW have never been supportive of a hedge fund bid fearing the buyer chop and shop the venerable automaker and were supportive of the Magna bid, with the UAW going so far as to prepare a framework for concessions, Automotive News reported recently.
In an apparent about face, UAW President Ron Gettlefinger, a DaimlerChrysler board member, announced UAW support for the deal, calling it the best of the options available, Automotive News reported. The CAW said they would be briefed on the plan Tuesday, but were still worried about the deal.
USAToday Cerberus was the target of an investigation into political corruption by former US Attorney Carol Lam, who along with 7 other US Attorneys was fired late last year. Political motivations are believed to have been responsible for her firing. She was investing political contributions made to Congressman Jerry Lewis, who was believed to have offered defense contracts in return for donations. MCI, a Cerberus owned company, received a major contract (worth more than $1 billion) in the Defense Appropriations budget even though the Pentagon had condemned MCI's performance because the project was years late, and severely over budget. The insertion of the contract came after Cerberus made $110,000 contribution to the re-election fund of the chairman of the Defense Appropriations subcommittee, Jerry Lewis (R-CA).