Cerberus Affiliate to Purchase 80% Stake
in Unit of DaimlerChrysler Auto Group to be Named Chrysler Holdings LLC

NEW YORK (May 15, 2007) — Last year, Cerberus Capital Management entered the school bus market with a bang with its September purchase of Blue Bird Corporation.

Cerberus continued its aggressive approach in the manufacturing industry this week by announcing its intent to purchase a majority stake in the Chrysler Group automotive business unit of DaimlerChrysler for $7.4 billion. The Chrysler Group manufactures Chrysler, Dodge and Jeep® vehicles. The impending deal represents a major private-equity acquisition attempt of one of the big three domestic auto makers.

Cerberus was aiming at purchasing just 80.1 percent of the future new company Chrysler Holdings, LLC, while Daimler Chrysler AG was to hold 19.9 percent.

Meanwhile, due to the new corporate structure, the name of DaimlerChrysler AG is to be changed to Daimler AG. A decision on this is to be taken by the shareholders at an Extraordinary Shareholders' Meeting probably in fall 2007, when the deal is expected to close, according to the press release.

Not only is it big news for domestic shareholders of Chrysler, Ford and GM, but there are of course also union ramifications. According to a company press release, Ron Gettelfinger, President of the United Autoworkers (UAW), said: "The transaction with Cerberus is in the best interests of our UAW members, the Chrysler Group and Daimler. We are pleased that this decision has been made. Because our members and the management can now focus entirely on the development and manufacture of quality products for the future of the Chrysler Group."

The press release added that obligations for pensions and healthcare costs are to be retained by Chrysler companies

It’s an especially interesting development for the school bus industry. Sources have said the status quo will remain at commercial truck maker Freightliner, which also manufacturers the school bus chassis for Thomas Built Buses and was a DaimlerChrysler AG business unit, at least until corporate restructuring announced on May 14. Freightliner will now reside under the proposed new Daimler AG flag and its business as well as that of the bus and finance groups, including Thomas Built Buses, will remain unchanged, according to a company press release. 

How this will all play out amid Cerberus' Blue Bird interests, if at all, is the wild card. One thing’s for sure, especially in light of the pending acquisition of Laidlaw by FirstGroup, it should prove to be an interesting summer.