question archive What type of defense was Daimler's acquisition of Chrysler in 1998? What was the price Daimler paid for Chrysler? What were the various synergy problems in this merger? What was the final outcome of the Daimler Chrysler Merger? Kirk Kerkorian and his Tracinda Corporation owned about 13
What type of defense was Daimler's acquisition of Chrysler in 1998? What was the price Daimler paid for Chrysler? What were the various synergy problems in this merger? What was the final outcome of the Daimler Chrysler Merger? Kirk Kerkorian and his Tracinda Corporation owned about 13
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What type of defense was Daimler's acquisition of Chrysler in 1998?
What was the price Daimler paid for Chrysler? What were the various synergy problems in this merger? What was the final outcome of the Daimler Chrysler Merger?
Kirk Kerkorian and his Tracinda Corporation owned about 13.8% of Chrysler, and he was trying to do an LBO of Chrysler back in January, 1998. However, this process was stopped by a late-arriving "White Knight"—Daimler-Benz, in May, 1998. The LBO process may have been necessary here to gain efficiency, increase cash flows, and trim down and revive Chrysler. The LBO would have shed its unprofitable brands and inefficient products and become leaner and meaner under private management. Then, it could have gone public again. Under an LBO arrangement, the risk of bankruptcy may have forced the auto unions to make some concessions. If Chrysler had gone through the LBO process 20 years ago, it could have privatized with a lot of debt, and the company could have been restructured. However, Daimler-Benz came in at the last minute as a White Knight and acquired Chrysler in a $36-$37 billion deal.
The Daimler-Chrysler merger failed because it had no synergies. There were no product-market synergies, nor any multinational cultural synergies. Chrysler is a middle market-focused company, and it manufactures average quality vehicles with average prices. Daimler-Benz is focused on the high-end market, and it produces high-quality vehicles with high-end prices. There were also cultural conflicts and power conflicts between Germany and Detroit. Daimler and Chrysler announced their separation in May 2007. Cerberus Capital Management (a private equity firm) paid $7.4 billion for 80.1% for Chrysler. This amount was primarily in the form of capital that Cerberus injected into Chrysler. Daimler retained a 19.9% share in the company. The de-merged Daimler AG received US $1.35 billion directly from Cerberus but directly invested US$2 billion in Chrysler itself. In a twist, in April 2007, Kirk Kerkorian entered the race again and offered $4.5 billion to buy Chrysler. Again, he was not able to acquire Chrysler.
In April 2009, Daimler reached a deal to unload its remaining 19.9% share of Chrysler and give it to Cerberus. To accomplish this closure, Daimler paid $600 million into Chrysler's pension plan over 3 years. It also forgave loans that it made to Chrysler when it sold 80.1% of that automaker to the private equity business Cerberus Capital Management in 2007. Chrysler filed for Chapter 11 bankruptcy reorganization on April 30, 2009. It emerged from bankruptcy on June 10, 2009, with the United Auto Workers pension fund, the U.S. government, and the Canadian government as principal owners. The Chrysler bailout cost the U.S. government $12.5 billion, and the sale of Chrysler to Fiat paid off $11.2 billion. However, the U.S. Government was not repaid the $1.3 billion. Chrysler's bailout ended in May 2011.
Over the next several years, Fiat acquired the shares of the other parties, and it completed this process in January 2014. Acquiring Chrysler cost Fiat a total of US $4.9 billion, plus an additional US $5.5 billion pension liability. Now Fiat Chrysler Automobiles, NV (abbreviated as FCA) has close to 236,000 full-time employees worldwide. It is headquartered in London, UK, for tax purposes. It is listed on the New York Stock Exchange and also on Borsa Italiana in Milan.
