Updated: Cerberus buys Chrysler

Updated: It’s official. Cerberus Capital Management has been chosen by DaimlerChrysler AG to be the new major shareholder of the ailing Chrysler Group, with the private equity firm paying close to $7.4 billion for an 80% stake. DaimlerChrysler AG will be renamed to simply ‘Daimler AG’ and will retain roughly 20%of Chrysler, the company reported today. Short change compared to the $36 billion spent to join the two carmakers nine years ago.

It comes after just two months of negotiations with several bidders including several other equity groups as well as auto parts supplier Magna International. DaimlerChrysler first mentioned that all options surrounding Chrysler were open back in February, following the announcement of a $1.5 billion loss and a restructuring plan that would cost up to 13,000 jobs.

“We're confident that we've found the solution that will create the greatest overall value, both for Daimler and Chrysler,” DaimlerChrysler CEO Dieter Zetsche said at the announcement today. Through the deal, about $5 billion will go to fund the newly created Chrysler Corp. LLC and $1.05 billion aid Chrysler Financial Services. The group will also receive a $400 million loan from Daimler, which is expected to gain $1.35 billion from the sale.

The Detroit Free Press reports that the deal has been approved by DaimlerChrysler's management board but is still awaiting a final decision from the company's supervisory board as well as regulatory approval. One area of unsuspected support was from UAW President Ron Gettelfinger, who said "the transaction with Cerberus is in the best interests of our UAW members, the Chrysler Group and Daimler."

Previous: It appears that Cerberus Capital Management is still in the running for the sale of Chrysler with latest reports suggesting that the private-equity firm is likely to be the winning bidder. An official from Chrysler revealed to Associated Press reporters that no final decision had been made but an announcement could come as early as Monday.

The potential deal comes after two months of negotiations with several bidders including several other equity groups as well as auto parts supplier Magna International. DaimlerChrysler first mentioned that all options surrounding Chrysler were open back in February, following the announcement of a $1.5 billion loss and a restructuring plan that would cost up to 13,000 jobs.

Analysts are predicting that the German parent would still retain a minority stake in Chrysler if the sale occurs. The Wall Street Journal has also reported that Cerberus would keep current Chrysler chief Tom LaSorda at the helm and former exec Wolfgang Bernhard as a board member.