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Daimler to give up stake in Chrysler and forgive loan

Daimler AG has agreed to surrender its ownership stake in Chrysler LLC and forgive repayment of a $1.5 billion loan, while Cerberus Capital Management dropped charges that Daimler hid the depth of Chrysler’s problems prior to the 2007 sale.

Daimler also will make three annual $200 million payments into Chrysler’s pension plans, beginning this year. An existing pension guaranty by Daimler of $1 billion to the U.S. Pension Benefit Guaranty Corp. will be reduced to $200 million.

Last September, Cerberus began talks with Daimler over the private equity fund’s possible purchase of Daimler’s stake in Chrysler. Those talks broke down after Cerberus accused Daimler of painting a rosier picture of Chrysler’s condition than financial reports warranted.

Meanwhile, Chrysler’s UAW workers are voting on a proposed agreement that could reduce the chance the company will file bankruptcy, which factory-level leaders unanimously recommended for approval Monday night. The company and union extended until May 25 a deadline for a buyout offer.

Some of Chrysler’s 26,000 hourly U.S. workers have already accepted the buyout, but neither the company nor the UAW would say how many.

Those who accepted, but want to withdraw their acceptance until May 25, had to notify their plant’s human resources department by Monday, according to a letter from General Holiefield, vice president of the UAW’s Chrysler department.

“I apologize for not being able to provide this information sooner,” Holiefield said.

Everyone who has accepted the offer will be entitled to any future improvements in the offer that may be negotiated between the UAW and Chrysler and Fiat.

The buyout provides a taxable lump sum of $75,000 and a $25,000 voucher for a new Chrysler vehicle for those under 55 with at least one year of seniority. Those between 55 and 62 with at least 10 years of service can retire with full pension benefits.

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