Tuesday, May 15, 2007
Cerberus' acquisition of an 80.1% interest in Chrysler is being called a "watershed" event. It provides further evidence that there is no limit to private equity's power to take over a business. Stocks of Ford and GM rose yesterday, in the hope that if Cerberus can work out with the unions a solution to Chrysler's $18 billion liability for pension and health-care benefits, then the other auto makers will be able to do the same. There is also the irony of Chrysler Daimler's paying $677 million in cash to get rid of a company that it bought nine years ago for $36 billion. “We obviously overestimated the potential of synergies,” said Chrysler Daimler's CEO Zetsche. For a sampling of the stories, see NYTimes, A Corporate Divorce on the Cheap and In Deal, a Test for the U.A.W.; WSJ, Chrysler Deal Heralds New Direction for Detroit.