Cerberus Capital Management best met five criteria to purchase Chrysler, DaimlerChrysler CEO Dieter Zetsche told a press conference in Stuttgart on Monday afternoon.
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These were: a sustainable, successful future for Chrysler; minimal risks and liabilities for Daimler in the future; the certainty of the transaction (“We didn’t want to be stuck in the middle,” Zetsche said); speed (to minimise uncertainty at Chrysler) and the value of the transaction.
“In all of those five counts, the offer we chose was the best in very clear terms,” Zetsche said. To laughter, he added: “I should say by far but it definitely was… the best and this made it very easy for us to make that decision.”
Zetsche said “quite a number of rumours” of United Auto Workers opposition were “not very close to reality”. He said that UAW chief Ron Gettelfinger’s “very clear” statement was “unrestrictedly positive”.
Cerberus chairman John Snow added that Cerberus had a good record of working successfully with companies that are organised (unionised).
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By GlobalData“We respect the role of organised labour and we greatly appreciate the support the UAW has given to this transaction. The statement that this is in the best interest of Chrysler from Mr Gettelfinger tells us a lot and we’re going to work to make sure that this company succeeds.
“Our objective here is a successful Chrysler and a successful Chrysler creates good opportunities for employees.”
Snow said former Chrysler chief operating officer Wolfgang Bernhard, who has been advising Cerberus and is a close friend of Chrysler president and CEO Tom La Sorda, would “not be joining the Chrysler management team”.
“I think he and Mr La Sorda will work well going forward as they have in the past,” Snow added.
Asked why, if the limit of Daimler and Chrysler cooperation had been reached, Daimler was keeping a Chrysler stake, Zetsche said the scope of synergies was limited but was still there and “significant”.
Meanwhile, “the potential downside due to the inherent risks of this business is eliminated,” he added. “So we basically have all the upside, opportunity and potential, without any potential downside risk.
“As least as important, we have a very strong interest in the successful future of Chrysler and, by maintaining this stake we can [give] the maximum support possible to ensure [this].”
Asked if it would have been better if Daimler-Benz had never bought Chrysler, Zetsche said: “At the time [of the merger], management, media and financial markets all shared [our] positive expectations and many were fulfilled – a much stronger Chrysler being one.”
But he noted: “We obviously over-estimated the potential of the synergies. Experience has shown there is potential in working together but, given the very different nature of our original markets – premium and volume – those synergies are limited.
“We over-estimated the potential of the availability of leading-edge technology from the Daimler side to the Chrysler side. We over-estimated the impact this would have on Chrysler.
“The American volume customer is not willing, and probably not able to pay, significant premium prices for premium technology being offered in those cars and consequently the brands could not develop so much incremental brand equity as we had hoped for [at the time of the merger].”
He acknowledged that DC had learned from the experience, which he doubted could have been predicted by extended due diligence on Chrysler.
“We now have the opportunity to continue the positive experiences and both sides can now focus on their core businesses while cooperating where it makes sense.”
Graeme Roberts
