Another hurdle to the realisation of the Chrysler-Fiat alliance has been cleared as Daimler AG, Chrysler, Cerberus and the US Pension Benefit Guaranty Corporation (PBGC) have signed an agreement that will see the German carmaker write off its minority stake in Chrysler LLC.

Under this agreement, Daimler’s remaining 19.9 percent shareholding in Chrysler will be redeemed and Daimler will forgive repayment of the loans extended to Chrysler, which were already written off in the 2008 financial statements. In addition, Daimler has agreed to pay US $200 million into Chrysler’s pension plans on the date of the execution of definitive agreements and in each of the next two years. In this way, Daimler is helping to secure pension payments to former employees of DaimlerChrysler. The existing pension guaranty of US $1 billion vis-à-vis the PBGC will be reduced to an amount of US $200 million and will remain in place until August 2012.

Chrysler and Cerberus waive any claims that might arise from representations and warranties made in the transaction of August 3, 2007, including the accusations made against Daimler in 2008 that Daimler allegedly improperly managed certain issues in the period between the signing of the agreement and the conclusion of the transaction. This also applies to the accusation that incomplete information was provided on the transaction.

Following the transfer of the term sheet into the final definitive agreements, the relationship between Daimler and Chrysler will solely consist of supplier-customer relations, including limited support for certain dealer financing until the end of September 2009, as well as certain guaranties. The effect on EBIT resulting from this agreement, which will be reflected in Daimler’s financial statements for the second quarter of 2009, is estimated at up to US $0.7 billion. The payments to be made in the years 2009 through 2011 amount to US $200 million per annum.