Business Channel 2007-05-16&18

This was the company that merged 1 with Daimler about 9 years ago hasn't been awfully 2 successful. The company paid more than 30 billion dollars back, then, this deal was for 7. 4 billion dollars for 80% of the company. In effect, Chrysler is coming home the name will change, Daimler Chrysler will change back to Daimler AG and, and there is some sense that savings 3 can be achieved and Chrysler can get back on a road to health. Here in the United States, even the unions are supporting this deal, there have been a number of suitors about two months ago on Valentine's Day. Daimler Chrysler had announced it was, it was looking for a buyer for Chrysler. This deal has been done. It's the first time a deal of this size has been done, where a private equity 4 firm, a firm that doesn't have to report to shareholders 5 in any public way is taking over something as major as a, as a big car company like this. But there are some sense as the sunrises here in O'BRIEN. This might actually be a new future for Chrysler. Chrysler is a company that is still heavily dependent on its truck unit and while it hasn't done as badly overtime 6 as the other Detroit-based automakers. The delayed response in, in layoffs 7 that were announced earlier this year indicated that Chrysler is in trouble. It's bleeding money and needs to have a better outcome. Unclear yet, how it's going to change the CEO and president Tom LaSorda under this agreement is staying on at least for some time and there're no further job cuts. 13, 000 job cuts were announced earlier this year. But the sense around here is that this new leadership at Chrysler might be what it needs to turn it around. Chrysler is coming home to the United States again. Daimler Chrysler will become Daimler and this will become Chrysler Holdings Corporation. Todd.

Ali, as we are all aware, you know, private equity firms, they don't tend to take a long-term view, they're trying restructure and then sell it on to somebody else. Er, there is a lot of fear you know, you say, the union's welcomed this because of their erratic 8 past. There is a lot of fear about a belt-tightening and what that mean, might mean for jobs. You know my question is you know, my question is what can they do that hasn't been done because you know, you have a structural 9 problem here in the sense that the Japanese automakers are just that much more efficient. In this sense, they have the cars that, that Americans want, so why does this private equity firm think they can accomplish but Chrysler hasn't been able to accomplish?

Yeah, you perfect question there, there are three things that the Japanese automakers have: One, is they got the cars that Americans are buying; Two, is they don't have those legacy 10 costs, the health-care costs that the US automakers are saddled with in Chrysler's case about 19 billion dollars worth of liability. And they have a price advantage because there are not unionized staffs, they, by depending on how you calculate it, it could be 30 bucks 11 an hour as a price advantage. How. . . where do these savings come from, it's unclear. In Tom LaSorda's words the present CEO of Chrysler he says Chrysler will be better positioned to focus on its long-term plan for recovery rather than just short term result. Ironically what he means is that the short term result that shareholders look at, the quarterly results that haven't been showing from Chrysler. They are thinking Cerberus is going to be able to take a longer term view of that. You're right. These private equity firms aren't looking for the longest term view where they may be able to take something more than a quarterly view, allowing them to turn this around. This is what these private equity firms do as you said, they buy this company, they turn them around and they get rid of it. There is no sense that the private equity firms are looking to be in the car business for any long period of time.