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Relations between Chrysler's current and former owners turned ugly Wednesday when private equity firm Cerberus Capital Management LP accused Daimler AG of "intentionally and materially" misleading Cerberus before the German automaker sold Chrysler last year.

Both sides slugged it out with dueling news releases. Cerberus claimed Daimler breached the sale contract, while Daimler called the allegations absurd.

The unusual public feud likely is a prelude to arbitration or a lawsuit over the sale, said Peter Henning, a former Securities and Exchange Commission attorney who teaches at Wayne State University Law School in Detroit.

Cerberus' statement accused Daimler of misrepresenting changes in underwriting practices for vehicle financing and leasing. That means Cerberus is alleging that Daimler inflated the value of its lease and loan portfolio by lending money to buyers who didn't meet its lending standards, Henning said.

Cerberus, he said, is essentially saying that "Daimler gussied Chrysler up to make it look good."

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