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MiscellaneousWhy Won't Chrysler's Owner Bail Themselves Out?
Posted by mike on 2008/12/11 8:27:30 (1451) reads

While the senate debates the current $14 billion bailout package for GM and Chrysler, Forbes recently published a fantastic article about Chrysler's parent company, Cerberus, and the fact that they probably have the cash to bail out Chrysler - they just don't want to. The article stems from a New York Times article about Cerberus' lobbying of U.S. Treasury Secretary Henry Paulson by former Treasury Secretary John Snow (now in the employment of Cerberus).

Cerberus is a private equity firm - the key word there is "private" meaning that for the most part, they get to keep their books closed. Dan Gerstein, the author of the article, does a great job of outlining the demands the U.S. Government should be making to Chrysler before giving them any of the bailout money. Some snippets:

Buried on the business page of The New York Times Saturday were the details of Detroit's biggest snow job yet--literally as well as figuratively. Turns out that Cerberus CEO John Snow, who spent three-and-a-half lackluster, and some might say lap-doggish, years as President Bush's second Treasury secretary, is leading a who's who of crony capitalists in a lobbying campaign for a taxpayer bailout to "salvage Cerberus' investment in Chrysler."

...snip...

To date, Cerberus has barely tapped any of its massive holdings--its investments in Chrysler are estimated to be just 7% of its assets under management--to stabilize Chrysler's precarious finances; the exception was a $2 billion loan in July. Instead, the company has shed 30,000 jobs, a specialty of cost-cutting corporate flip artists like Cerberus.

...snip...

"We're not in this for the money," said Cerberus COO Mark Neporent, in what easily qualifies as the most laughable statement in American politics since Sarah Palin said seeing Russia qualified her to be commander in chief.

Enough of the snippets - go read the entire article for yourself.

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hal2814
Posted: 2008/12/11 11:19  Updated: 2008/12/11 11:19
Quite a regular
Joined: 2006/5/23
From:
Posts: 49
 Don't look so surprised...
Cerebrus will do anything they can to make make a buck. Cerebrus is the same company that wiped out Mervyns by purchasing them and then spinning them off as their own company minus their property holdings. This basically resulted in Cerebrus gouging Mervyns on land leases for land Mervyns previously owned.

Poster Thread
tmedlock
Posted: 2008/12/11 9:50  Updated: 2008/12/11 9:50
Just can't stay away
Joined: 2007/1/11
From: New Hampshire
Posts: 83
 Re: Why Won't Chrysler's Owner Bail Themselves ...
I have a question which seems to have a huge impact on this topic. However, I have no idea how to look for the answer. So, I will ask and see if anyone knows. I believe Cerberus owns Chrysler. If Chrysler files for bankrupcy, is Cerberus liable for Chryslers outstanding debt?
If they are NOT liable, then (from their point of view) it would seem like it makes real sense to go after a government loan (what have they got to loose).
If they are liable, as a taxpayer, this would make me happy. If it is true that they have tons of money, we will get our money back from them.
I'm betting they are NOT liable. If they were, I doubt they would risk going further into debt by borrowing from the government.

Poster Thread
MarkH
Posted: 2008/12/11 11:06  Updated: 2008/12/11 11:15
Home away from home
Joined: 2005/7/20
From: The Great White North
Posts: 494
 Re: Why Won't Chrysler's Owner Bail Themselves ...
Cerberus Capital Management L.P. owns an 80.1 percent stake in Chrysler LLC. I read that they generate something like $100B/year in revenue... That's a pretty goodly dilution factor for bad investments like Chrysler...

L.P. = limited partnership
L.L.C. = limited liability company
Both have legal & tax implications that we'll need an accountant to explain... It's a safe bet that if Chrysler owes you money and they go Chapter 11, you're at their mercy and Cerberus has their uber-capitalist ass well-covered... I'd be working on a C.O.D. only basis, if I were a vendor that supplied Chrysler! Oh, wait...

I don't think Cerberus needs a loan, or will ever go Chapter 11. They're just looking for a quick buyout from the troubled bastard child they've adopted, or from the future foster parents.

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AngryNJ
Posted: 2008/12/11 9:23  Updated: 2008/12/11 9:23
Quite a regular
Joined: 2006/4/25
From:
Posts: 59
 Re: Why Won't Chrysler's Owner Bail Themselves ...
Cerberus has a goal to make as much profit as possible. Purchasing Chrysler has been a disaster so far for them in that regard.

At this moment, they have no reason to pour cash into Chrysler. Why would they? They are going to wait for the bailout and if they dont get it, they will go into bankruptcy protection. They might go into bankruptcy protection whether they get bailout money or not. But in there eyes, they might as well get that loan/bailout first.

Poster Thread
MarkH
Posted: 2008/12/11 9:21  Updated: 2008/12/11 9:36
Home away from home
Joined: 2005/7/20
From: The Great White North
Posts: 494
 Re: Why Won't Chrysler's Owner Bail Themselves ...
...the most laughable statement in American politics since Sarah Palin said seeing Russia qualified her to be commander in chief.

First of all, Gov. Palin did not state that proximity to Russia "qualified" her to be CINC --no more than Junior Senator Barack Hussein Obama's credentials as an inner-city community organizer qualifies him-- she was merely pointing out that her 2 nearest neighbors were foreign countries... and that Alaska has more dealings with Canada & Russia than do the other 49 states. There are few soldiers who wouldn't want to work under her...

But on to Cerberus...

"We're not in this for the money," said Cerberus COO Mark Neporent..."

It's a good thing they're not in it for the money! Cerberus got into a rapidly declining industry they had little familiarity with, hoping to turn a quick buck. Boy, did that backfire! Now, the smart move is to wait for a "free" government bailout and recoup as much as possible from one of the worst investment decisions in history. Cerberus would be foolish to waste another dollar on Chrysler, unless it involves bribes to sway policians their way. And don't think for a second, that that isn't going on in Washington!


Prediction: whether by direct government bailout, or by merging with GM, Cerberus will likely break even on the deal... AND THEN RUN!

Poster Thread
jpsmith
Posted: 2008/12/12 16:58  Updated: 2008/12/12 16:58
Just can't stay away
Joined: 2006/7/25
From:
Posts: 97
 Re: Why Won't Chrysler's Owner Bail Themselves ...
...Junior Senator Barack Hussein Obama...


You're funny. Just not for the reasons you think you are.
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