How Cerberus Enticed Daimlerchrysler

DaimlerChrysler AG's sale of its American luxuryto move very fast on this."
division Chrysler Group for $7.4 billion would mark anSecrecy was a principal concern. On the fifth of
epic event in the evolution of the global auto realm.March, Cerberus senior executive Lenard Tessler and
Though the transaction is construed as the end of ahis aides arrived at the Walter P. Chrysler Museum.
great international merger, investors showedThey were then shuttled to Chrysler's "design dome,"
enthusiasm to bet billions on the ailing company with anwhich has been transformed into a virtual showroom.
uncertain future.Eventually, Cerberus trumped the powerful rivals to
On February 14 last year, the bomb of selling Chryslerwin the bidding for the ailing American division of
exploded. "No option is being excluded," said DieterDaimler. Cerberus was willing to invest billions into
Zetsche Chairman and CEO of Daimler. He added, "InChrysler's operations and assume all of its union
the interest of arriving at the best possible solution forliabilities. "Cerberus came forward and said, we really
the Chrysler Group and DaimlerChrysler as a whole."like this business (and) we hear all your requirements,"
Zetsche evaded dozens of queries about the potentialsaid one source close to Daimler. When Cerberus
sale of Chrysler nine years after it was acquired byapproved to a mid-May deadline, the deal was all but
Daimler-Benz. "Please understand that we cannotclinched.
provide you with any more details at this point," he said.On May 12, Tom LaSorda, Chrysler CEO, flew to
The decision seemed abrupt, almost bizarre. But inStuttgart with Ron Gettelfinger, the chief of the United
reality, Daimler had been preparing for the moment forAuto Workers union. Gettelfinger had opposed the
weeks. The German automaker had hired investmentsale of Chrysler from the very beginning. But after
bank J.P. Morgan Chase & Co. to examine its optionsmeeting with LaSorda and Zetsche, he agreed to
for Chrysler. Larry Slaughter, a senior executive in thesupport Cerberus as the new owner of Chrysler.
firm's London office who had negotiated previousOn May 14 in Stuttgart, Zetsche announced the
deals for Daimler, led the project. Inside Daimler, chief"solution" to a nine-year marriage that was beyond
strategist Rüdiger Grube was tapped as therepair. For $7.4 billion, Cerberus would acquire 80.1
Daimler's point man on the deal.percent of Chrysler and relieve Daimler of all
Over the next ninety days, Daimler engaged in aresponsibility for its former American partner. "With this
whirlwind auction played out in secret meetings intransaction," Zetsche said, "we have created the right
Auburn Hills, New York, London and Stuttgart. Chryslerconditions for a new start for Chrysler and Daimler."
suitors include the Blackstone Group, Cerberus andCerberus Chairman John Snow vowed that his firm
Kohlberg, Kravis, Roberts & Co., General Motors Corp.,would offer a "good home" for Chrysler. "We believe
and Magna International Inc.in Chrysler," he said. After the announcement, Zetsche
The German automaker had no interest in an exposedflew to Auburn Hills for one final meeting at Chrysler. In
bidding battle. Instead, Zetsche instructed J.P. Morgana poignant "town hall" gathering, the German executive
to choose bidders with the financial means andsaid his goodbyes to the troops in Auburn Hills.
capability to do a deal quickly and decisively. "TheLike the repair manuals, Cerberus will aid Chrysler to
three criteria were value, speed and certainty," saidpatch up the mistakes in the past. Chrysler is counting
one person familiar with the process. "Daimler wantedon its turnaround plan to return to profitability.