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Chrysler Owner Cerberus Turns On Daimler

Majority Chrysler owner Cerberus Capital -- named for the three-headed dog of mythology -- is baring its fangs at German automaker Daimler, who sold Cerberus its stake in Chrysler last year.

Cerberus is a private-equity firm known for buying troubled companies, slashing costs and flipping them -- pretty much what all private-equity firms do, though Cerberus has done so with particular vigor in its previous investments.

In the case of Chrysler, Cerberus is turning on Daimler like an overbred Doberman. Today, Cerberus said Daimler "intentionally and materially" misled the private-equity firm when the two were putting together the deal for Cerberus to buy Chrysler.

Since that deal, Chrysler has been crippled by a $1-billion-per-month cash-burn rate, hammered by plummeting sales and is in real danger of running out of money. As such, Daimler has been trying to give its remaining 19.9 percent stake in Chrysler to Cerberus but said Cerberus is making that difficult to do: Cerberus is demanding to be paid by Daimler for taking the remaining stake off its hands.

Savvy Cerberus knows a weak hand when it sees one: It's presiding over a faltering automaker and recognizes a chance to raise some money, quick.

Cerberus, which owns 80.1 percent of Chrysler, is said to be demanding $9.3 billion to take the remaining 18.1 percent from Chrysler -- well more than the $7.2 billion Cerberus paid for its 80.1 percent stake.

Daimler says Cerberus, basically, is out of its private-equity mind to think it's going to get the remaining stake in Chrysler and more than $9 billion.

Cerberus has responded by saying today: "Cerberus and Chrysler have concluded that Daimler intentionally and materially breached its obligations under the relevant contracts relating to the Chrysler transaction."

"This conduct, among other reasons, led the parties to engage in lengthy negotiations toward a mutually agreeable settlement," Cerberus continued. "Daimler has, unfortunately, refused to recognize the gravity of the claims relating to its deliberate conduct that resulted in the impairment of Chrysler's business and added to and multiplied the adverse effects of the current automotive and macro-economic environment."

So Daimler and Chrysler/Cerberus have been trying to reach a deal on how much the remaining Chrysler stake is worth and who should pay whom for it. If that fails -- it's not looking so promising right now -- a courtroom beckons.

By Frank Ahrens  |  November 26, 2008; 3:15 PM ET
Categories:  The Ticker  | Tags: Chrysler, Detroit bailout  
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