Managing in Troubled Times Case Study

Troubled Carmaker Chrysler (A): Can Cerberus be its Holy Grail?

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Abstract:
The decade old merger of German automaker Daimler Benz AG and American auto icon Chrysler Corp. ended in May 2007, when in an unprecedented auto deal, majority stake was acquired by New York based private equity firm Cerberus Capital Management, L.P. Hailed as 'the merger made in heaven', the deal between Daimler and Chrysler turned out to be a complete failure. Changing trends of US auto industry, huge legacy of health-care cost, shift in consumer demand, increasing fuel prices and competition from Asian carmakers are some of the factors saddling down Chrysler. At the time of takeover Chrysler was already in the midst of a turnaround plan that includes the elimination of 13,000 jobs and a huge investment for new improved product offering to meet shifting consumer demand.

Pedagogical Objectives:

• To analyse the private holding of Chrysler, its consequences and issues for its new parent, Cerberus
• To discuss on what possible strategies can Cerberus adopt for Chrysler and would this private equity firm be able to turnaround the distressed Chrysler and be its holy grail?

Keywords : Chrysler; Daimler Benz AG; Automobile Industry; American Auto Industry; Big Three; Cerebrus Capital Management; Private Equity; Challenge for Chrysler and Cerebrus; Asian Automakers; Private Equity Firms; Turnaround; Takeover; UAW; International Expansion; Mergers and cquisitions

Contents:

• DaimlerChrysler to Daimler and Chrysler
• Troubles with Chrysler: Issues for Cerberus
• Can Cerberus be Chrysler's Holy Grail?