Mercedes sells Chrysler to General Motors

[monsoon]

Funny that Daimler is so eager to dump Chrysler--it's not doing that poorly. I think it's because Dr. Z is embarrassed at his abyssmal failure as pitchman!

[suburban george3]

Just to update what's the current thoughts on what may happen:

- Two equity groups are looking closely at Chrysler's financials. Thought is that Chysler is worth anything from $0(or even a negative amount) to around $14 billion. It's doubtful in the current shape of Chrylser that an Investment group would do anymore than declare bankruptcy and sell Chrylser's assests of piecemeal. I doubt at that point if Chrysler and Dodge would continue to exist. Jeep is a brand that would probably elicit a buyer due to the brand name.

- GM could indeed buy Chrylser, just as a tactic to have more bargaining power with the UAW on upcoming healthcare talks. That would mean mainly GM is buying Chrylser's problems and would have to maintain production for a time to satisfy the Union.

- DiamlerChrylser may not sell. They are saying that they will not "auction" off Chrylser. They intend to choose a suitable buyer (considering they paid around $37 billion, they stand to lose quite a bit on their investment.) DiamlerChrysler has said that if a suitable buyer is not found they will continue with ownership and address the current issues.

- There is also a Canadian Auto Parts manufacturer and two additional private equity groups are also "looking" at the possibility of a purchase.

On the potential negative side for Chrysler owners/consumers/employees and the economy:

- If an investment group buys Chrysler, I would say it would be likely most Chrylser operations would cease within 2 years. If you own a Chrylser product, you would soon after run into the potential problem of finding replacment parts and service for your vehicle. Also, how would warranty work be addressed if warranties were even honored.

- Tens of thousands of Chrysler Group employees could be put out of work in the same time frame, devestating multiple communities in the US, Canada, and Mexico.

On the potential positive side for Chrylser:

- Jeep is a very valuable brand that may bouy Chrylser's worth and could help in bargaining.

- 20+ new models are in the pipe for release in the next 3 years along with 13 updated models. These new models are more fuel conscious which could help the company for future sales.

I find this very distressing as an owner of a recent Chrysler product. This could be a scenario where I(along with millions of others) where I own an automobile which has no corporate backing.

MSNBC Article "Dr. Z" says Chrysler won't be auctioned.

MSNBC article about the "true worth" of Chrysler

[suburban george3]

German investors are starting a movement to rename "DiamlerChrysler" to "DiamlerBenz." They are wanting this done regardless if Chrysler is sold or not by spring of 2008.

Also, it appears the leading candidates are the investment/equity groups and a Canadian auto parts manufacturer. GM is still rumored, but that scenerio is appearing more unlikely.

Current valuation has the value of Chrylser @ $4-5 billion, far less than the $37 billion Chrylser fetched in the "Merger of Equals" with Diamler.

The two leading candidates, The Blackstone Group and Cerberus Capital Management LP, have current ties to the auto industry and usually buy troubled companies to turn-around. There is talk that they have already begun assembling a team to head the Chrylser group and return it to profitability.Cerberus has signed Wolfgang Bernhard, who helped lead Chrysler to profitability 5 years afo before leaving for VW, has been signed to an advisory contract. Bernhard left DiamlerChrysler before the Chrysler unit started its tailspin. The UAW would probably grudgingly be willing to work with him as well.

[monsoon]

Dr. Z announced this morning that Chrysler was going to be given to Cerebus, a private equity firm. When I say given, Diamler actually made a net payment to Cerebus for them to take the troubled car company off their hands. DiamlerChrysler will now simply be known as Diamler. (they are not going back to Diamler-Benz).

I guess the good thing about it is no more stupid Dr. Z commercials. He has gone back to Germany for good.

What isn't so good is what is going to happen to the employees. I can imagine that Cerebus is going to turn the screws fast to cut costs.

[suburban george3]

The employees are rightfully worried. Cerebus will undoubtedly demand equal footing for pension and retirement benefits with GM and Ford which they don't currently enjoy. Also, I would expect major cost cutting.

On a positive note, Cerebus has multiple holdings in the automotive sector and has qualified people lined up to run Chrylser. Being a proud owner of multiple Chrylser products, I do hope they find a way to make it a profitable company selling desirable cars.

[Captain Worley]

Bought for 37 billion, sold for 7 billion. Seems the Daimer boys need remedial econ classes.

Glad to see they were bought by someone with at least a little auto experience. They also own 51% of GMAC.

Chryslers got some great products in the pipleine. best of luck to them.

[monsoon]

Bought for 37 billion, sold for 7 billion. Seems the Daimer boys need remedial econ classes......

[Captain Worley]

I didn't know they paid Cerberus to take over the pension. I knew there were 18B in liabilities. It is interesting to me to see how all that works in the 'bidness' world.

Yeah, the history of Mopar since the 80s is pretty interesting. I can deride Iaccoca for holding on to the K-car chassis too long, and having too many vehicles based on it, but they sold decently, and all the tooling was amortised, so they made Mopar good money.

Iaccoca, held on too long though, IMO. He wasn't thrilled with the Neon or the LH cars (Interpid, etc), and I think that led to his ousting. They had some good product in the 90s, although quality wasn't the greatest. Sadly, the Daimler 'merger of equals' cancheled the LH replacement, an achingly beautiful car, for the 300?Magnum/Charger, which, while not bad cars at all, have terribly trendy stylling and are now suffering.

You are dead nuts on with the Jeep comment, but danged if Compasses aren't flying off the lots. I never figured that. Apparently, mostly women buyers. It remains to see if that trend holds up.

[suburban george3]

I didn't know they paid Cerberus to take over the pension. I knew there were 18B in liabilities. It is interesting to me to see how all that works in the 'bidness' world.

Yeah, the history of Mopar since the 80s is pretty interesting. I can deride Iaccoca for holding on to the K-car chassis too long, and having too many vehicles based on it, but they sold decently, and all the tooling was amortised, so they made Mopar good money.

Iaccoca, held on too long though, IMO. He wasn't thrilled with the Neon or the LH cars (Interpid, etc), and I think that led to his ousting. They had some good product in the 90s, although quality wasn't the greatest. Sadly, the Daimler 'merger of equals' cancheled the LH replacement, an achingly beautiful car, for the 300?Magnum/Charger, which, while not bad cars at all, have terribly trendy stylling and are now suffering.

You are dead nuts on with the Jeep comment, but danged if Compasses aren't flying off the lots. I never figured that. Apparently, mostly women buyers. It remains to see if that trend holds up.

[Captain Worley]

Chryselr Crossfire used the chassis of the previous generation SLK, and the LX cars were based on the previous generation E-class components, but AFAIK, Mercedes didn't use Chrysler components.

Mercedes did take a big hit in quality control during those years, but that may have been a German phenomenon, because BMW and Audi both took reliability dives during that era.

[monsoon]

^Very true. Chrysler benefited from having access to old Mercedes technology. Mercedes was very careful not to make the mistake of using any Chrysler components or platforms in its product lines. (Unlike what Ford and GM did with Saab, and Volvo) Their plan was to take discontinued Mercedes parts and used them on current Chrysler vehicles. The most notible examples of this are the Mercedes 5-speed and 320 engine which was introduced into Mercedes cars in 1997. The above mentioned Charger/300/magnum uses this transmission for example and the Pacificia has the 320 engine.

The one exception to this is the current Chyrsler Crossfire which shares a platform with the Mercedes SLK and both are built on the same assembly line in Europe. This is a boutique car for Chrysler so it really wasn't the same as building a Volvo on a Taurus chassis.

[Captain Worley]

I think the big difference between Chrysler/Mercedes, GM/Saab, and Ford/Volvo, was that GM and Ford were in the drivers seat at Saab and Volvo. Mercedes was in the drivers seat at Chryler. Downscale marque buyers accept previous generation technology of an upscale marque a lot better than upscale marque buyers accept crrent technology from downscale marques.

I didn't know the Pacifica was using the 320 engine..is it built in the US?

As an off topic aside, monsoon, don't you have a Merceds with that tranny? Hows it holdng up? I only ask because Chrysler hasn't had good luck with trannies since the dreaded Ultraglide 4spd.

[monsoon]

The mechanic told you wrong. The Pacifica was an independent Chyrsler design. It was never used at Mercedes Benz. The closest thing that Mercedes has to this kind of car is the R-Class and it is definitely not on the Pacifica platform. Instead it's built on the ML & G class chassis. These 3 vehicles are built at the Mercedes plant in Alabama, the only ones to be produced in the USA, and don't share any common platforms with Chrysler.

The Crossfire as mentioned above, was created from a Mercedes SLK. They detuned it, removed some features, and gave it a softtop. It was a quick way for them to produce a high end sports car for Chrysler.