• The Wall Street Journal (subscription required), Monday, May 14, 2007 10:30 AM

In a deal announced this morning, an affiliate of private-equity firm Cerberus Capital Management LP will make a capital contribution of $7.4 billion in return for an 80.1% equity interest in Chrysler Holding LLC, a new entity. DaimlerChrysler will keep a 19.9% stake, and will retain obligations for pensions and health-care costs. Chrysler CEO Tom LaSorda will run the company under the deal, which is subject to the approval of DaimlerChrysler's supervisory board.

Cerberus was viewed as a strong contender to buy the company because of its deep pockets and the potential synergies to be had by marrying Chrysler's Chrysler Financial arm with Cerberus's 51% stake in GMAC, GM's former financing arm.

Cerberus has invested in various auto-parts makers, including Germany's Peguform, which manufactures interior and exterior plastic parts. Earlier this year, it hired Wolfgang Bernhard, a former Chrysler operating chief, as an adviser. Bernhard is highly regarded by his former Chrysler colleagues.

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