Chrysler accuses Daimler of diverting billions

DaimlerChrysler

Creditors of the old Chrysler have charged Daimler AG with fraud, in a 31 page lawsuit filed Monday in Federal Bankruptcy Court in New York. The suit claims Daimler fraudulently diverted billions of dollars from Chrysler by separating their financial division, known as Chrysler Financial, from the parent company only days before the sale of 80.1% of the automaker to Cerberus Capital Management, two years ago. According to the suit, Daimler was able to secure an inflated price from Cerberus by transferring Chrysler Financial to the holding company and shielding its assets from creditors.

The group of unsecured creditors, led by the nation’s biggest auto retailer, AutoNation Inc., seek to share the assets of Chrysler that were excluded from the recent bankruptcy deal. Among said assets are various factories, though given the current condition of the real estate market, it is unclear as to whether or not these properties can be liquidated.

The suit also claims that Daimler had toyed with the idea of selling Chrysler as early as 2006, due to concerns of the inability to meet pension and retiree health care obligations of over $17 billion.

– By: Stephen Calogera

Source: Detroit Free Press