Daimler and Chrysler Divorce

Remember when Michael Moore acidly referred to General Motors, Ford, and the Chrysler half of DaimlerChrysler AG as the last 2 1/2 car companies in America? You know how the "merger" of Chrysler and Daimler-Benz actually ended up benefiting the Germans over the Americans? Do you rue the day Chrysler gave away its independence at one of the most productive periods in its history? That era, it seems, is now over.

DaimlerChrysler AG announced today that it will sell 80.1 percent of the Chrysler Group, which has been losing money, to private equity firm Cerberus Capital Management LP for $7.4 billion, unwinding a troubled 1998 combination aimed at creating a global leader. The nine-year marriage between the two companies simply didn't create the lean, mean automotive giant it was supposed to. DaimlerChrysler's shares went up 5.6 percent as a result.

Daimler will still hold a 19.9 percent equity share in Chrysler to allow the companies to collaborate together on future projects. The majority sale to a private equity firm has worried some autoworker's union leaders, given the temptation by firms like Cerberus to downsize more than just the cars in these circumstances, but the UAW is convinced that this is the best and only recourse for the Chrysler Group.

Cerberus includes executives such as Wolfgang Bernhard, a former Chrysler executive who also worked at Volkswagen, and David Thursfield, who used to run Ford of Europe, which seems reassuring. However, Cerberus is chaired by former Treasury Secretary John Snow, who was forced to resign his government post by the White House, and former Vice President Dan Quayle is also an adviser, which doesn't seem reassuring.

Given all the money Chrysler has been losing, and given the enormous amount of faith Cerberus and DaimlerChrysler stockholders have placed in the deal, it looks like Chrysler and the rest of Detroit are in for a bumpy ride.