Blog: Chrysler and Cerberus
Dave Leggett | 14 May 2007
The news of the Chrysler Group sale to private equity firm Cerberus is a little bit surprising. The Magna bid had sounded to many like the favourite, driven by Magna's growing industrial ambitions.
Is $7.4bn for 80% of the company a bit expensive once legacy costs are rolled in? Not sure about that at this stage (but Kerkorian's offer was $4.5bn). Cerberus seems to have some automotive credentials though. Ex-Ford David Thursfield is there and ex-Goldmans and Ford adviser Kenneth Leet has a role too. Wolfgang Bernhard is part of the set-up.
What is the private equity firm's strategy/approach going to be? This is where it gets interesting.
Aside from the Jeep brand, there's not much on the books that looks good for possible flog-off on a shortish timescale. Does that mean a private equity firm in for the long haul and a load of grief in trying to get Chrysler profitable, negotiate with the UAW etc?
Or can a private equity firm simply bulldoze Chrysler to profitability? Take no prisoners? Make it work where the former management failed? How aggressive will/can Cerberus be on costs? Surprising to see UAW's Gettelfinger making such positive comments, but maybe he felt there was no option but to initially embrace the new owner.
Here's a pithy comment in USA Today: "This is not going to be a 'strip and flip,' " said Joseph Phillippi, president of AutoTrends Consulting. Chrysler "is not a 90-day wonder."
Cerberus Capital Management has taken over a majority interest in Chrysler Group and its related financial services business for $7.4bn from DaimlerChrysler, the two companies announced early on Monda...
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