DaimlerChrysler AG ended its nine-year ownership of money-losing Chrysler, handing control of the American carmaker to private-equity firm Cerberus Capital Management LP and getting out of $19 billion in retirement liabilities.

Cerberus will invest $7.4 billion in a new venture called Chrysler Holding LLC, while Stuttgart, Germany-based DaimlerChrysler will contribute a net $650 million. Cerberus gets 80.1% of the company; Daimler, which paid $36 billion for the automaker in 1998, retains 19.9%.

Daimler’s stock peaked five months after the takeover and never recovered. Chrysler lost $680 million last year and ceded market share to Toyota Motor Corp. while relying too much on the stagnant North American market. The chief executive officer of DaimlerChrysler, Dieter Zetsche, failed to keep Chrysler profitable after completing a reorganization he began as head of the business.

“The sad and unfortunate reality for the DaimlerChrysler shareholder is how much value destruction there has been over the years,” the chief investment officer at CCLA Investment Management Ltd, James Bevan, said.

Shares of DaimlerChrysler rose 1.09 euros, or 1.8%, to 61.70 euros in Frankfurt. Earlier the stock jumped as much as 7.8%, the biggest gain since former CEO Juergen Schrempp, architect of the Chrysler purchase, announced his departure in July 2005.

The stock has gained 25% since February 13, the day before Mr. Zetsche said “all options” were open for Chrysler. Daimler-Chrysler’s American shares rose $2.12 to $84.12 at 4:01 p.m. in New York Stock Exchange composite trading.

“We’re confident that we’ve found the solution that will create the greatest overall value, both for Daimler and Chrysler,” said Mr. Zetsche in a statement. The company will change its name to Daimler AG.

Of New York-based Cerberus’s total contribution, $5 billion will go to Chrysler’s industrial business and $1.05 billion into Chrysler’s financial services business, while Daimler gets the balance. Daimler will end up paying $650 million in the transaction, including granting a loan of $400 million to Chrysler. Existing projects with Mercedes will be continued and a joint council, consisting of management board representatives, will be formed to discuss business projects.

“The amount Daimler is having to pay is much less than feared,” a manager about 1.3 billion euros at SEB Asset Management in Frankfurt, Juergen Meyer, said. “It’s very important to look at the cash flow.”

The president of the United Auto Workers, Ron Gettelfinger, said in the statement he supports the deal, terming the takeover “in the best interests of our UAW members, the Chrysler Group, and Daimler.” Pension and health-care costs associated with Chrysler will be taken over by the new company.

“The decisive detail is the fact that health care and pension obligations remain at Chrysler,” an Equity Strategist at Dresdner Bank in Frankfurt, Uwe Treckmann, said.

Chrysler sells fewer cars in America than General Motors Corp., Ford Motor Co., and Toyota, making it the fourth-largest American carmaker. Daimler-Benz AG bought Chrysler Corp. in 1998 for $36 billion in what it billed as a “merger of equals.”

The carmaker will no longer report quarterly earnings, which will help the management team, including the chief executive officer, Tom LaSorda, and the chief operating officer, Eric Ridenour, “to take a longer-term view,” the chairman of Cerberus, John Snow, said during a press conference.

Mr. LaSorda already is in the midst of a restructuring designed to reduce costs at Auburn Hills, Mich.-based Chrysler, including shedding 13,000 jobs and closing a Delaware manufacturing plant by 2010.

“Chrysler is poised to accomplish great things in the years ahead,” Mr. Snow, a former U.S. treasury secretary, said in an interview. “Chrysler has a great future. It has been through some difficult times. Together we can overcome the difficulties.”

Chrysler since 1998 has posted annual profits of as much as $5 billion and losses almost as large, increasingly becoming the target of investors’s ire. Its latest tailspin marked a third descent into losses since Lee Iacocca saved the automaker from bankruptcy 25 years ago.

Chrysler Corp. was created in crisis. It was formed in 1925 by former GM executive Walter Chrysler, who five years earlier had taken over Maxwell Motor Co. at the request of creditors and restored profit. He had been tapped to rescue Maxwell after leaving GM in a dispute with Chairman William Durant.

Early on, Chrysler was the 27thlargest car company in America. By 1929, it had cemented its position as third biggest, behind GM and Ford Motor Co.

For the past three decades, Chrysler has veered from failure to success, with periodic boardroom drama. The automaker almost went bankrupt in 1980, after fuel shortages and rising gasoline prices choked sales of its big, rearwheel-drive cars.

Daimler may say today that Chrysler lost 908 million euros in the first quarter on the cost of job cuts and closing a factory, with group net income reaching 1.26 billion euros, the median of nine analysts surveyed by Bloomberg News. Year-earlier figures aren’t available because of an accounting change.

Net income will fall by between 3 billion euros and 4 billion euros this year. The 19.9% stake in Chrysler Holding LLC will be included at equity in the van, bus and other segment for reporting purposes.