It appears to be a done deal: Chrysler is going private, through a private equity fund, Cerberus. One article which touches on the subject is from www.Slate.com which states: Chrysler's labor unions have frequently denounced the prospect of private ownership, calling it the "worst-case" scenario for the company http://www.washingtonpost.com/wp-dyn/content/article/2007/05/13/AR2007051300856_pf.html. They probably have reason to worry because, as the WSJ notes up high, Cerberus has a history of cutting costs, and it's likely that labor would be one of its first targets. According to the deal, DaimlerChrysler would keep a 20 percent stake, while Cerberus would own 80 percent. How much money will change hands in the deal isn't quite clear yet, although there's speculation that it won't be very much since Cerberus would take over Chrysler's costs, which include $18 billion in debt related to retiree health care. Chrysler had a $1.5 billion loss in 2006."

Another article which more fully develops the subject is from this morning's Washington Post. That article notes that when Daimler took over Chrysler in 1998, that so called merger cost Daimler 35 billion. Again, the complete financial terms of the buy out are not public at this point, but the Post article states that: "Chrysler will be turned over free of other debt, and about $6 billion of the sale price will be used to infuse fresh capital into the company. Though transaction will reduce DaimlerChrysler's profit by as much as $5.5 billion this year, the company said, it will allow the German automaker to shed Chrysler from its name and concentrate again on its Mercedes luxury line. The German company plans to rename itself Daimler AG."

Private equity funds are attracted to this type of business. "Chrysler is the kind of company that private-equity firms like to target: a distressed operation with strong cash flow and potential for turnaround.

The sale is expected to close later this year.

Cerberus chairman John W. Snow, the former Treasury secretary, said Cerberus believes that the U.S. auto industry has "inherent strength," and that putting Chrysler in private hands will allow the company management and workers 'to focus on their long-term plans rather than the pressures of short-term earnings expectations.'"

Two final notes on this buy out: first, there were several groups looking to purchase Chrysler and Cerberus won the bid. One reason may be that they used a true "car guy" with vast knowledge of Chrysler as a consultant, Wolfgang Bernhard. He may end up with an ongoing role in the company. But whatever his go forward role, I suspect his presence was very helpful in getting the top union and other constituencies to support this buy out. Second, evidently the chairman of Chrysler will stay with the company to continue the reorganization of the business he started, which may make for better continuity once new owners take over.

Here is a link to one article from the Washington Post:
http://www.washingtonpost.com/wp-dyn/content/article/2007/05/14/AR2007051400004.html?nav=rss_email/components?nav=slate

Mike