A report carried on Reuters newsagency said that Daimler AG on Monday reached an agreement with Chrysler, the US carmaker's owner Cerberus Capital Management, and the US Pension Benefit Guaranty Corp to exit its 19.9 percent stake in the company.
Daimler sold an 80.1 percent stake in the US carmaker to private equity firm Cerberus in 2007, ending a stormy decade long relationship with the struggling US carmaker that is now operating under US government aid.
Daimler said the remaining stake in Chrysler would be redeemed and it would forgive the repayment of loans it had extended to Chrysler that it already has written off in its 2008 financial statements.
The German carmaker had loaned Chrysler US$1.5 billion in 2008 that is a second-lien secured loan, junior to a nearly US$6.9 billion of loans now under negotiations between the US Treasury and other Chrysler creditors.
Daimler said it agreed to pay $200 million to Chrysler's pension plans on the date of the execution of the deal and in each of the next two years.
That will reduce an existing pension guarantee of US$1 billion to US$200 million and that will remain in place to August 2012, Daimler said.
The deal comes a day after the United Auto Workers union agreed to a concessionary deal to cut Chrysler's obligations to a retiree health care fund.
With Daimler getting out of Chrysler, negotiations with Chrysler first lien lenders remains the chief remaining obstacle for the carmaker to meet the month-end deadline that the US government has mandated in response to Chrysler's request for additional loans.
President Barack Obama's auto task force has told Chrysler it has until May 1 to reach agreements for an alliance with Italy's Fiat SpA, a reduction in secured debt and resolution of labour issues with its unions.
Daimler's exit paves the way for Fiat to strike a planned deal with Chrysler.
Cerberus and Chrysler have been in negotiations with Daimler to try to buy the remaining stake back from the German automaker since late 2007.