Daimler Stops Talks with Cerberus on 19.9% Chrysler Stake

*Update: Cerberus Statement Added After the Jump

Divorces always seem to end in the most bitter ways. Mercedes-Benz's parent company Daimler issued an edgy statement today in concern of the negotiations with private equity firm Cerberus for the sale of Daimler's 19.9% shareholding in Chrysler LLC. Daimler, which has temporarily stopped the talks, charged Chrysler LLC's owner for making "exaggerated demands" that exceed the value of the private equity firm's investment in Chrysler.

The German automaker also stated that Cerberus is claiming Daimler did not run Chrysler properly between signing and closing the deal, and that Daimler had provided incomplete information about the business. Daimler rejected both allegations as being "absurd" and "without substance".

DAIMLER STATEMENT

"The negotiations between Daimler AG and Cerberus Capital Management LLC on the redemption of Daimler's 19.9% shareholding in Chrysler Holding LLC ("Chrysler") and other issues related to Cerberus's investment in Chrysler have been made considerably more difficult during the last weeks due to exaggerated demands by Cerberus.

These demands by Cerberus exceed the value of Cerberus' investment in Chrysler. For the acquisition of an 80.1% stake in Chrysler, Cerberus had invested USD 7.2 bn. The claims made now go beyond the framework of the contractually agreed possible obligations under representations and warranties.

The new claims also include an allegation of conduct outside the ordinary course of business by Daimler during the time between signing and closing of the transaction as well as the allegation of incomplete information about the business. Daimler rejects these absurd allegations and the claims derived therefore as being completely without substance."

CERBERUS STATEMENT

"Cerberus and Chrysler have concluded that Daimler intentionally and materially breached its obligations under the relevant contracts relating to the Chrysler transaction. These serious breaches include, but are not limited to, misrepresentations relating to extraordinary changes in underwriting practices with regard to vehicle acquisition financing and leasing, as well as non-ordinary course lending and leasing practices.

"This conduct, among other reasons, led the parties to engage in lengthy negotiations toward a mutually agreeable settlement. Daimler has, unfortunately, refused to recognize the gravity of the claims relating to its deliberate conduct that resulted in the impairment of Chrysler's business and added to and multiplied the adverse effects of the current automotive and macro-economic environment."

"We are disappointed that Daimler has refused to negotiate in good faith in the face of the plain facts of which they are well aware. Accordingly, we are considering our strategic options and will have further comment after assessing the effects of Daimler's recent actions."