Daimler agrees to unload remaining Chrysler stake

Daimler AG announced today that it has reached an agreement to unload its remaining 19.9 percent stake in Chrysler LLC.

"Daimler's remaining 19.9 percent shareholding in Chrysler will be redeemed, and Daimler will forgive repayment of the loans extended to Chrysler, which were already written off in the 2008 financial statement," Daimler said in a prepared statement.

All told, Daimler will write off $700 million as a result of the deal, according to the statement.

The deal comes a day after the UAW agreed to a tentative deal to reduce Chrysler's obligations to its health care fund.

The deal removes an obstacle from Chrysler's path toward its planned partnership with another European carmaker: Fiat S.p.A.

Daimler and Cerberus Capital Management LP had been haggling since last fall trying to find a way to dispose of Daimler's remaining interest in Chrysler to simplify Chrysler's ownership structure, which became more complex after the automaker was granted a $4 billion loan from the U.S. government in late December.

End of an era

The agreement signals the end of a contentious 11-year relationship between Daimler and Chrysler.

It started in 1998 as Daimler-Benz chief Juergen Schrempp's "merger of equals" that quickly became a Daimler takeover of Chrysler. Daimler sold 80 percent of Chrysler to Cerberus in May 2007, but Daimler since has been trying to shed the remaining share, which it officially values at zero.

Daimler said today it has signed a term sheet with Cerberus and the U.S. Pension Benefit Guaranty Corp.

In the deal, Daimler also will make three annual payments of $200 million each into Chrysler's pension plans. The payments will be made April 30 of 2009, 2010 and 2011, according to a Daimler spokesman.

On Sunday, Chrysler reached a tentative agreement with the UAW that helps pave the way for Chrysler's proposed product-sharing alliance with Fiat.

Chrysler still must negotiate an agreement with its bondholders, who control $7 billion in debt in the automaker. Without a deal, Chrysler faces a possible bankruptcy filing after Thursday, April 30--the deadline set by the Obama administration for Chrysler to demonstrate it can become viable.

Daimler is holding a conference call to discuss its first-quarter results on Tuesday and will discuss the issue further.

"Following the transfer of the term sheet into the final definitive agreements, the relationship between Daimler and Chrysler will solely consist of dealer-supplier-customer relations including limited support for certain dealer financing until the end of September 2009," the Daimler statement said.

By Bradford Wernle- Automotive News