Chrysler, the American division of Daimler has been sold to a private equity group - Cerberus for $7.4 billion
Daimler, maker of Mercedes-Benz cars bought Chrysler in 1998 for $36 billion. Not a very profitable purchase
full story
http://www.msnbc.msn.com/...
The German-American automaker said in a statement that an affiliate of Cerberus will hold the majority stake in a new Chrysler Holding LLC while DaimlerChrysler will keep a 19.9 percent stake.
so what does this mean
Cerberus wanted Chrysler's finance division --- Cerberus owns about 1/2 of GMAC.
Last year, GM sold a majority stake in its General Motors Acceptance Corp. financing arm to a consortium of investors led by Cerberus for about $14 billion. Analysts had said buying a big stake in Chrysler would let Cerberus combine GMAC operations with Chrysler Financial.
Cerberus is looking to make money --- not that companies shouldnt make money -- but private equity firms like Cerberus are NOT interested in manufacturing or products or jobs --- they are interested in making money. Hence the desire to combine the finance divisions of Chrysler and GMAC -- Cerberus wants to control the financing of most American cars, NOT the manufacturing of any product.
On its Web site, Cerberus said the companies in which it has a controlling or significant minority stakes generate over $60 billion in annual revenues. Its worldwide investments include businesses involved in aerospace and military, autos, building products, retailing, financial services, health care, distribution, paper and packaging, real estate, telecommunications, transportation and travel.
and of course
Cerberus was recently involved in controversy surrounding its contributions to Republican Congressman Jerry Lewis. MCI, a company owned by Cerberus, had a $1 billion dollar contract to create the Navy/Marine computer network. However, the Defense Appropriations subcommittee released a critical report of MCI after receiving complaints about cost overruns and bad management. In response to this report, the committee had proposed to cut the MCI contract by 10%. In June 2003, Lewis, the head of the Defense Appropriations subcommittee, received over $110,000 dollars in contribution from Cerberus. Shortly thereafter, Lewis decided to preserve full funding for the $1 billion dollar contract. In 2005, Lewis was elected as Chairman of the House Appropriations Committee. He acknowledged that the fundraising efforts of Cerberus "played a very significant role" in winning the post. Before her dismissal, US Attorney Carol Lam began an investigation of Lewis's contributors in 2006.
Cerberus is also buying 6 television stations from CBS
For the time being most Chrysler employees are probably OK (just OK) -- but that will be short lived as the private equity company (Cerberus i believe is much like the infamous Bush-infested Carlyle Group) looks to institute savings -- which of course means cuts, job cuts -- and even possibly the sale of Chrysler's most profitable division --- Jeep.
So another American company looks headed toward the dustbin --- a victim of our own "success" --- and the corporate money take over of American industry. As our manufacturing shrinks and shrinks we are more and more mortgaging our society's future to fewer and fewer people. (I could go on and on about the income gap in this country -- but that is another diary).
Only time will show how this plays out -- but i wouldnt be optimistic --- as costs rise, profits get eaten. Toyota soars to the world's leading auto maked and oil prices increase (thus eating away at American auto makers share) --- the prospects for Chrysler's long term health and possibly survival are not good. and with Bush in charge, neither is America's.