DaimlerChrysler and Cerberus have agreed to support the financing of the majority takeover of Chrysler by Cerberus "in light of highly volatile US loan markets", meaning the companies were unable to raise finance from the usual sources.

US loan markets are in turmoil over the so-called sub-prime default crisis. Home buyers offered low introductory interest rates are increasingly defaulting on their loans as the rates rise after the introduction deals expire and this has led some lenders to the brink of bankruptcy, a loss of consumer confidence and a shortage of loan money.

DaimlerChrysler late last week closed the deal transferring a majority interest in Chrysler Group and its related financial services business in NAFTA to a subsidiary of Cerberus Capital Management.

The subsidiary takes over 80.1% in Chrysler Holding while DaimlerChrysler retains a 19.9% interest, as announced earlier.

Both companies will subscribe $US2bn of second lien debt for Chrysler's automotive business, to be drawn within 12 months. DaimlerChrysler's portion will be $1.5bn and the debt will be priced at market conditions. One year after the closing, DaimlerChrysler has the right to sell this loan in the credit market - maturity is seven years.

"DaimlerChrysler's financing support is a strong sign of its overall determination to make sure that, under the majority of Cerberus, Chrysler has a good start as a successful stand-alone car company," the automaker said in a statement.

Effective last Friday, the DC board of management was reduced to six members with Chrylser's Tom LaSorda, Eric Ridenour and Tom Sidlik no longer members. Bodo Uebber additionally assumed responsibility for procurement.

DaimlerChrysler is to be renamed Daimler AG and shareholders will vote on the change at an extraordinary meeting in Berlin on 4 October.

DC chairman Dieter Zetsche said: "[This] marks a new chapter in the history of our company. Based on the clearly defined strategies in our [business units], and our company's healthy balance sheet, we have every reason to move confidently into the future."

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