StaffAllpar HomeMore NewsCarsTrucksUpcomingRepairsTest drives

Cerberus exchanging all its Chrysler equity to labor, creditors

by David Zatz on

According to a new Automotive News article, Cerberus is planning to give away its entire stake in Chrysler – roughly 80% of the company – to labor and creditors. [Update: Cerberus did not announce whether it would be giving equity solely to the UAW, or to the UAW Employee Beneficiary Trust and to individual autoworkers].

Bush’s loans require Chrysler to provide half of its obligation to the UAW Employee Beneficiary Association trust with equity. In addition, Cerberus has said it would exchange equity for the UAW’s agreement to take immediate severe pay and benefits reductions (the UAW has already agreed to these cutbacks as of the expiration of the current contract). Cerberus is also offering equity to creditors in return for lowering of debt.

As a result, Chrysler would be entirely owned by labor, creditors, and Daimler. It appears that the UAW (including the health-care fund) would have the most equity. The move leaves Cerberus with Chrysler Financial, which is likely to be a strong profit-maker when the economy turns around; the private equity firm has already agreed to invest the next $2 billion in Chrysler Financial profits in Chrysler, LLC. 

Cerberus also noted that it had not invested more in Chrysler because its charter limits how much it can invest in any one organization.

Some questions remain, including whether the CAW or its workers would receive equity, the status of employees in Mexican plants, and whether the UAW or individuals will receive equity in return for wage cuts.

The move should put aside rumors of merging with General Motors and being purchased by a Chinese company. However, because Cerberus will still own Chrysler Financial, it will still have a stake in ensuring Chrysler’s future success. If Chrysler regains status and sales, Chrysler Financial is likely to achieve high profits.

David Zatz founded Allpar in 1998 (based on a site he had begun in 1993-94), after years of writing reviews for retail trades. He has been quoted by the New York Times, the Daily Telegraph, the Detroit News, and USA Today. Before making Allpar a full-time career, he was a consultant in organizational psychology. You can reach him by using our contact form (much preferred) or by calling (313) 766-2304


Mopar’s first PHEV wins Ward’s
portal - journey crossover replacement
Windsor, AWD, and the mysterious CUV

How’s ProMaster doing?

More Mopar Car
and Truck News

Some popular Allpar pages





Dodge Demon

2018 Wrangler JL



Staff details/contactsTerms of ServiceInformation is presented to the best of our knowledge. Plans change and sometimes mistakes are made. Decisions or purchases made based on this site's verbiage or images are done at the reader's own risk. Also see the Allpar News archives, 1997-2008 • Copyright © 2008-2017, Allpar LLC. All rights reserved. • Mopar, Dodge, Jeep, Chrysler, HEMI, and certain other names are trademarks of Fiat Chrysler Automobiles.