Daimler had sold an 80.1 percent stake in the U.S. automaker to private equity firm Cerberus
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 automaker had loaned Chrysler $1.5 billion in 2008 that is a second-lien secured loan, junior to a nearly $6.9 billion of loans now under negotiations between the U.S. 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 $1 billion to $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 automaker to meet the month-end deadline that the U.S. 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
Daimler's exit paves the way for Fiat to strike a planned deal with Chrysler.
Cerberus and Chrysler has been in negotiations with Daimler to try to buy the remaining stake back from the German automaker since late 2007.
(Reporting by Poornima Gupta and David Bailey; Editing Bernard Orr, Richard Chang)