As part of its ambitions to become a truly global player, Daimler had acquired Chrysler for 36 billion dollars in 1998 and has ploughed billions more into the US auto maker in subsequent years.

But the group was finally forced to ditch its dream of global domination on Monday when Daimler announced that it was drawing a line under an investment that had turned disastrously wrong by selling it to US private equity firm Cerberus.

Under terms of the deal, scheduled to be completed in the third quarter pending the necessary regulatory approval, Cerberus would pay 5.5 billion euros or 7.4 billion dollars for an 80.1-percent stake in Chrysler, just a fifth of the original purchase price.

"An affiliate of private equity firm Cerberus Capital Management will make a capital contribution of 5.5 billion euros (7.4 billion euros) in return for an 80.1-percent equity interest in Chrysler," the world's number five car maker said in a statement.

DaimlerChrysler, which would change its name back to Daimler, would continue to hold a 19.9-percent equity interest Chrysler, the statement added.

Initially, the deal would cut three-to-four billion euros off DaimlerChrysler's net profit this year, the car maker said.

And the transaction would result in a net cash outflow of 500 million euros for DaimlerChrysler.

But Daimler would now be able to focus on its profitable Mercedes brands and its trucks division in future.

"We've done our homework in our corporate functions and in all of our divisions. As result of our stratetic review, we have a well-defined roadmap to lead us into a food future," said chief executive Dieter Zetsche.