TOM LASORDA is a quiet, modest man who knows how to run car factories. He never seems comfortable on big public occasions but last Tuesday, when he faced the Detroit press corps, he was word-perfect.

Clearly, what most pleased Chrysler’s chief executive was that his firm was no longer beholden to German overlords. The previous day it had been announced in Stuttgart that Cerberus Capital, the private-equity firm, would pay $7.4 billion (£3.7 billion) to take Chrysler away from Daimler.

“We’re going to show that the American company is on its way back,” said LaSorda. He might have added “private” to that statement because several times he repeated his relief that Chrysler would no longer have to make earnings reports for stock-market scrutiny. “We’ll be able to run the company the way we want to run it, without worrying about quarterly profit announcements.”

His attitude is understandable, especially since Chrysler lost $1.4 billion in the first quarter of this year. The stock markets pushed Daimler Chrysler to break up its transatlantic enterprise. Chrysler’s losses were bringing down the successful Mercedes-Benz car and truck businesses. Dieter Zetsche, chairman of Daimler Chrysler and until 2005 the chief of its Chrysler division, was persuaded that it was time to cut and run.

Zetsche said: “We have realised the synergies between Mercedes and Chrysler, and the additional opportunities for cooperation between two businesses that operate in distinctly different market segments, are limited. In addition, the extreme volatility and price pressure in Chrysler’s core American market limit Daimler Chrysler’s overall profitability and the value of our shares.”

Daimler will continue to hold 19.9% of Chrysler, but the sale of the majority stake marks the end of the disastrous expansion strategy of Zetsche’s predecessor, Jür-gen Schrempp.

Nine years and one week earlier, at a hastily convened meeting in the London Arena, Schrempp and Bob Eaton, chairman of Chrysler, had made the triumphant announcement of the marriage of Daimler and Chrysler. Schrempp said at the time: “This is much more than a merger. We are creating the world’s leading automotive company for the 21st century.”

It was indeed more than a merger. Daimler paid $36 billion and quickly took the upper hand. The executives who had made Chrysler a marriageable proposition soon departed and the Germans had control. But Daimler Chrysler was never to take a leading position in the global motor industry.

Schrempp went on to acquire a 34% controlling share of Japan’s Mitsubishi Motors and 10% of Hyundai of Korea. Neither investment paid off and eventually Daimler walked away from both. Chrysler had its profitable periods, but these pale into insignificance compared with the estimated $50 billion Daimler Chrysler has put into the American business since 1998.

The Cerberus deal is effectively a giveaway, as Daimler will receive only about $1.4 billion (the rest going into the new Chrysler company) and will contribute nearly $2 billion to clear pension and healthcare liabilities.

Private-equity firms are notorious for short-term investment, cost-cutting and asset-stripping. LaSorda has been assured that Cerberus will take a longer view. Asked if he feared the company being torn apart and sold off piecemeal, he replied: “That is absolutely not going to happen. We want to grow this company. It will not be broken up under any circumstances. Our brands will all stay together.”

Those brands are Chrysler, Dodge and Jeep. All three are biased towards big gas-guzzlers – a problem at a time of rising fuel prices in America and envi-ronmental concern about 4x4s.

Chrysler also has a huge inventory of unsold vehicles; the scale of this is demonstrated by LaSorda’s claim to have reduced stocks by 100,000 this year. Incentives to “move the metal” have been up to $5,000 per car.

Cerberus is steeped in the motor business, with interests in component suppliers and the National and Alamo car-rental firms. Its chief executive, Steve Feinberg, is proud to drive American cars and trucks and has approved the continuation of the three-year “recovery and transformation plan” put in place in February, even though it predicts only a 2.5% return by 2009.

Last year Cerberus acquired a 51% share of GMAC (General Motors Acceptances Corporation) which it is expected to put together with Chrysler’s financial-services business. Among Cerberus executives are David Thursfield, who was head of Ford’s international operations, and Wolfgang Bernhard, who as chief operating officer was Zetsche’s No 2 at Chrysler. Bernhard is described as an adviser to the new Chrysler but will not rejoin the company.

Chrysler will continue to be dependent on Daimler for technology – hence the Germans’ retained share. The main chassis parts of the Chrysler 300C saloon are from Mercedes, as are the diesel engines that Chrysler and Jeep need if these brands are to expand in export markets.

But LaSorda said the new Chrysler would seek alliances with other carmakers wherever that made sense. “There are great opportunities for us in Asia, India and Russia,” he said.

Cerberus has funds of $17 billion available for Chrysler during the postdivorce period but will have to face the same pension and healthcare commitments that have crippled Ford and General Motors. Those companies have renegotiated health costs with the powerful United Auto Workers union, which refused the same concessions to Chrysler because it was owned by a profitable German company. The union’s attitude may now change. LaSorda, fourth-genera-tion Chrysler man and son of a union leader, certainly hopes so.

Like BMW with Rover, Mercedes couldn’t make a success of running a maker of less expensive, everyman cars. The question now is: how can Cerberus make money from Chrysler when one of the world’s most respected carmakers couldn’t?

Although LaSorda hadn’t slept during the days leading up to the sale announcement, he had a ready, if not entirely convincing answer to that: “We have the combination of Daimler technology and a great financial institution. And we are a private company, so we are not exposed at every decision, nor required to think short-term.”

Chrysler has had a chequered history. Started by Walter P Chrysler in 1924, it has at different times been respected as a leader of quality and technology and written off as the lame duck of the Detroit “big three” carmakers. At one time it was a force overseas, taking over the Rootes Group in Britain and Simca in France, but Chrysler Europe ran into financial trouble – and used up a lot of British government aid – before being sold to Peugeot for a knockdown price in 1978. Industry veteran Lee Iacocca famously arranged a bail-out by the US government in 1980.

Now Chrysler will be a test for a new model of ownership, showing whether private equity is a suitable vehicle to drive a traditional manufacturing company that needs long-term investment but where it is hard to achieve consistent profits. Cerberus has made the biggest private-equity takeover in the motor business. If it succeeds, others will surely follow. Land Rover and Jaguar could be next.

PAST GLORY LIVES ON

CHRYSLER also gave its name to one of New York’s best-known and most-admired skyscrapers. The Chrysler building, located on Lexington Avenue, was built to house the company in 1929 and was briefly the world’s tallest building and the first man-made structure to pass 1,000 ft. The height to the top of its spire is 1,048ft (319 metres). In Manhattan, only the Empire State building is taller.

Designed by William Van Alen, its art-deco ornamentation was based on features from Chrysler cars. The corners of the 61st floor are adorned with gargoyles in the form of eagles, replicas of the bonnet mascots on 1929 models.

During construction the building was topped out in dramatic fashion. The entire seven-storey pinnacle was assembled inside the building, and then hoisted into position through the roof opening and anchored on top in just one and a half hours.

Since then the skyscraper has consistently been voted the most elegant building in New York.

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