New column: Health-care providers masquerading as carmakers in Detroit

My latest dead-tree effort is out today, in the issue with Al Gore on the cover and online here. It's actually in the magazine as a two-page story, part of the thing called "The Well." But I wrote it as just a slightly longer-than-usual column. Regular readers of this blog will be familiar with the theme:

On May 14, German automaker DaimlerChrysler announced that it would pay private-equity firm Cerberus Capital Management of New York City $675 million to take a bunch of old people's medical problems off its hands.

True, there was a carmaker thrown in as part of the deal, and Cerberus agreed to invest a few billion dollars to help get struggling Chrysler back on its feet. Just after the transaction was announced, DaimlerChrysler CEO Dieter Zetsche (he of the big mustache and the TV ads) bristled when a journalist suggested that he had paid Cerberus to cart Chrysler away: "It was clearly stated that Cerberus invests 7.4 billion U.S. dollars in this transaction, which is not any form of being paid," he snapped.

But there's no denying that Daimler, as the company will be known once Chrysler is driven off the lot, is forking over $675 million to make the deal happen--a remarkable repudiation of its $36 billion purchase of Chrysler nine years ago. And there's also no denying that the sums changing hands in the current transaction pale next to the $18 billion in health-care obligations that Chrysler owes its retirees. Read more.

The $675 million figure deserves explanation, since it's been variously reported in the media as $650 million, $677 million, $1 billion and $1.5 billion. DaimlerChrysler said its "net cash outflow" from the transaction was 0.5 billion euros. Depending on the euro-dollar exchange rate you're using, that gets you to $650, $675 or $677 million. The gross negative cash flow (that is, not counting the money Cerberus is paying DaimlerChrysler) is 1.2 billion euros, or $1.5 billion. And the "prepayment compensation," whatever that is, is 650 million euros, or about $1 billion. It strikes me that net cash outflow is the valid measure of what DaimlerChrysler paid out to make the transaction happen. But then I'm no investment banker.