DaimlerChrysler Reaches Deal with Insurers Over Class Action

January 4, 2007

U.S. German car maker DaimlerChrysler AG has reached an agreement with insurers over their contribution to a $300 million settlement of an investor lawsuit over the 1998 merger that created the company, a spokesman said.

Thomas Froehlich, a spokesman for the automaker in Stuttgart, said DaimlerChrysler and the insurance companies, led by ACE Ltd., reached an agreement before the new year.

Froehlich declined to discuss details. However, the Financial Times Deutschland newspaper said the insurers would contribute 168 million euros ($222 million), out of an outstanding 175 million euros ($231 million) stemming from the 2003 settlement of the lawsuit over the merger of Daimler-Benz and Chrysler Corp.

The newspaper said U.S. insurer AIG had already paid $25 million (18.9 million euros) and that DaimlerChrysler had paid the rest.

The head of ACE in Germany, Lothar Riedle, also confirmed an agreement but declined to elaborate.

Chrysler shareholders in the U.S., who argued that they were duped into approving the deal that combined Chrysler and Daimler-Benz when executives from both companies portrayed it as a merger of equals, had filed a class-action suit seeking $22 billion in damages.

The lawsuit cited a 2000 interview with former DaimlerChrysler Chairman Juergen Schrempp in which he said billing the combination as a merger rather than a takeover was “for psychological reasons” only.

Daimler had counted on liability insurance on Schrempp to cover part of the settlement, but several companies had refused to pay.

The class action suit was independent of another similar lawsuit filed by Kirk Kerkorian. The billionaire investor claimed that Daimler-Benz engineered a takeover of Chrysler, then cheated him out of an acquisition premium by claiming it was a merger of equals. A Delaware court rejected his suit.

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