Dodge Challenger Forums - Magna loses bid for Chrysler

Thanks to purnrg for this article.

Well, I am very disappointed that Magna didn't get Chrysler. I think they had Chrysler's best interest at heart.

Magna loses bid for Chrysler

Frank Stronach's attempt to vault his company, Magna International, into the big leagues of automobile manufacturing has failed, with a New York investment firm winning the bidding for the troubled Chrysler Group.

DaimlerChrysler AG announced Monday that Cerberus Capital Management LP has topped bids by Magna and its partner, Toronto-based investment company Onex Corp., and Blackstone Group, another New York-based private equity fund.

The German-American auto maker said Cerberus will pay $7.4-billion (U.S.) to acquire 80.1 per cent in the new Chrysler Holding LLC while DaimlerChrysler will keep 19.9 per cent. It said that Chrysler would keep its heavy obligations for pensions and health care costs, a key issue complicating DaimlerChrysler's effort to sell the division.

"We're confident that we've found the solution that will create the greatest overall value — both for Daimler and Chrysler," said DaimlerChrysler chief executive officer Dieter Zetsche. "With this transaction, we have created the right conditions for a new start for Chrysler and Daimler."

He added that the two companies would still work together, particularly on existing conventional and alternative drive systems, purchasing, sales and financial services outside North America.

DaimlerChrysler said the deal is likely to be complete by the third quarter and that it would reduce its overall profit by some 3 billion to 4 billion euros ($4.05-billion to $5.39-billion) for 2007.

Shareholders will decide on changing the company's name to Daimler AG.

DaimlerChrysler shareholders were excited about Monday's news, sending the company's stock up more than 6 per cent before it fell back to 62.82 euros, still up more than 3.6 per cent.

John W. Snow, chairman of Cerberus, said the deal was a sign of faith in Chrysler, an iconic American brand and third-largest carmaker behind General Motors Co. and Ford Motor Co.

"We welcome Chrysler into the Cerberus family of companies and believe Cerberus will be a good home for Chrysler," he said in a statement. "Most importantly, we believe in Chrysler."

The Magna-Onex bid appeared earlier this month to be a front-runner, in part because of strong opposition from Chrysler's two key North American unions to both the Cerberus and Blackstone offers.

Mr. Stronach said late last week that he believed his company's bid, which analysts and industry sources valued at about $5-billion, was still in the running for Chrysler, which was effectively put up for sale by DaimlerChrysler on Feb. 14, causing a divorce in what was described as an automotive marriage made in heaven when Daimler-Benz AG and Chrysler Corp. hooked up in 1998.

Magna needed to participate in any resolution of the Chrysler situation, Mr. Stronach has said numerous times, to protect the thousands of Magna jobs at stake and the deep relationships Magna has with Chrysler.

About 15 per cent of Magna's $24.2-billion in annual sales are to the Chrysler group.

It manufactures complete vehicles on a contract basis in Austria for Chrysler and operates a paint shop at a Chrysler Jeep assembly plant in Toledo, Ohio. There are Magna parts ranging from complete seat systems to bumper covers to structural body components on virtually every Chrysler vehicle put together in North America.

The decision by DaimlerChrysler to sell the division to Cerberus comes just days after another earth-shaking event at Magna — the surrender of complete control of the company by Mr. Stronach who founded the company in a Toronto garage in 1957 and has presided over its growth into a global powerhouse with more than 80,000 employees and operations around the world.

He will share control