May 7

This Day in History

Automotive

May 7, 1998:

Daimler-Benz announces purchase of Chrysler Corp.

On this day in 1998, the German automobile company Daimler-Benz--maker of the world-famous luxury car brand Mercedes-Benz--announces a $36 billion merger with the United States-based Chrysler Corporation.

The purchase of Chrysler, America's third-largest car company, by the Stuttgart-based Daimler-Benz marked the biggest acquisition by a foreign buyer of any U.S. company in history. Though marketed to investors as an equal pairing, it soon emerged that Daimler would be the dominant partner, with its stockholders owning the majority of the new company's shares. For Chrysler, headquartered in Auburn Hills, Michigan, the end of independence was a surprising twist in a striking comeback story. After a near-collapse and a government bailout in 1979 that saved it from bankruptcy, the company surged back in the 1980s under the leadership of the former Ford executive Lee Iacocca, in a revival spurred in part by the tremendous success of its trendsetting minivan.

The new company, DaimlerChrysler AG, began trading on the Frankfurt and New York stock exchanges the following November. A few months later, according to a 2001 article in The New York Times, its stock price rose to an impressive high of $108.62 per share. The euphoria proved to be short-lived, however. While Daimler had been attracted by the profitability of Chrysler's minivans and Jeeps, over the next few years profits were up and down, and by the fall of 2003 the Chrysler Group had cut some 26,000 jobs and was still losing money.

In 2006, according to the Times, Chrysler posted a loss of $1.5 billion and fell behind Toyota to fourth place in the American car market. This loss came despite the company's splashy launch of 10 new Chrysler models that year, with plans to unveil eight more. The following May, however, after reportedly negotiating with General Motors about a potential sale, DaimlerChrysler announced it was selling 80.1 percent of Chrysler to the private-equity firm Cerberus Capital Management for $7.4 billion. DaimlerChrysler, soon renamed Daimler AG, kept a 19.9 percent stake in the new company, known as Chrysler LLC.

By late 2008, increasingly dismal sales led Chrysler to seek federal funds to the tune of $4 billion to stay afloat. Under pressure from the Obama administration, the company filed for bankruptcy protection in April 2009 and will enter into a planned partnership with the Italian automaker Fiat.

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