Re:7 Person Year Application Rewritten in 2 Person Months
by startupcrazy on Tuesday October 02, 2007 @07:44PM
(#62345)
Chrysler is currently worth less than nothing, but Chrysler Financial has real value. Basically, they acquired the unfunded liability of Chrysler as the price of Chrysler Financial. Chrysler Financial may be work 18B of pension obligations to Cerberus, especially if they get synergy with GMAC.
BTW, those of us who follow the financial news are laughing because Daimler (the previous owner) literally paid Cerberus to take Chrysler off its hands. The purchase price was nominally $7.4B, but it was structured as an investment into Chrysler itself. In other words, Cerberus "bought" Chrysler by putting cash into a business it now owns, effectively paying itself. In addition to that, Daimler paid Cerberus $650M in cash. Yes, that's the seller giving money to the buyer.
The reason for this is that Chrysler is currently worth less than nothing. Daimler's earnings are up $1.5B since getting rid of it, and Cerberus took on Chrysler's $18B of pension obligations. Cerberus probably figures that it can renegotiate with the UAW and default on Chrysler's pension plan, which'll help return it to profitability. Daimler couldn't do this because its profitable Mercedes division was effectively subsidizing workers in Detroit, costing it bargaining power in any attempt to stiff the unions.