Cerberus offers to forfeit Chrysler equity
December 22, 2008 by Matt Brogan
In brighter times, Cerberus Capital Management LP hoped to save Chrysler LLC, which it called an American automotive icon. Now the private-equity firm is offering its entire equity stake in the automaker to labor and creditors to help Chrysler secure its $4 billion portion of a federal loan package.
Cerberus said it was making the offer to help Chrysler “make the accommodations necessary to affect the restructuring” of the company. Under the federal loan announced Friday by President George W. Bush, Chrysler needs to swap equity for debt to reduce its debt load and to fund half of its obligation to the UAW Voluntary Employee Beneficiary Association trust with stock.
Cerberus also announced that its Chrysler Financial unit would offer $2 billion to backstop the federal loan, which Chrysler must repay at the end of the first quarter. Cerberus acquired 80.1 percent of Chrysler from Daimler AG for $7.4 billion in 2007.
“Cerberus is really focusing on the lending side of the automobile industry,” said Lars Luedeman, head of auto analysis, referring to Cerberus’s stake in Chrysler Financial and GMAC, “They’re effectively offering up the automotive side of the operation.”
Craig Fitzgerald, analyst for Plante & Moran, said Chrysler’s best hope for the future lies with finding a partner or partners “that will cause some of their brands and products to be moved over to competitors.”
Cerberus’s move to give up its equity stake could help the restructuring, said Kimberly Rodriguez, also with Grant Thornton.
“It’s really a pre-packaged bankruptcy without the pre-pack where equity is no longer in control,” she said. “It’s a cooperative way of handing over your position in a company to help it see another day. It’s an industry-supportive move by Cerberus, which is more beneficial to the other OEMs.”
The offer came two weeks after Cerberus had been lambasted in congressional hearings. Sen. Bob Corker, R-Tenn., asked Chrysler CEO Bob Nardelli why taxpayers should fund a Chrysler bailout when Cerberus refused to put any more money in it.
In a statement today, Cerberus responded to that criticism. The company said it manages and allocates capital on behalf of its investors — including “retirees, teachers, municipal workers and ordinary citizens” — and its charter limits how much it can put in any single investment.
Said the statement: “Cerberus is not a deposit-taking institution that can act as an ATM machine for its portfolio companies.”
Print it: 
GM and Ford make such good products
challenger aside, i cant think of a car in the single Chrysler range that appeals to me.
Of course, because highly wealthy private equity firm, Cerberus, is in the business of banks and $$$. They are run by Bush Sr’s former VP Dan Quayle and Bush Jr’s former Secretary of Treasury, and own Aozora Bank in Japan and BawagPSK Bank in Austria. With the help of Bush Jr’s current Secretary of Treasury Henry Paulson, Cerberus has gotten part of the US Treasury giveaway for Chrysler. Cerberus wants to let Chrysler dissolve, but keep Chrysler Financial. GMAC Financial, also owned by Cerberus, is desperately coercing its stakeholders to raise money so that GMAC can become a bank-holding company and thus also get a piece of the US Treasure Chest giveaway. Time has been running out for Cerberus, because Bush, Paulson, and access to their Treasure Chest, will be gone soon.
Dan Quayle has been running Cerberus for many years, but Cerberus obtained John Snow, Alvaro de Molina (from Bank of America), Chrysler/Chrysler Financial, and GMAC all within 1 year. Cerberus never wanted to maintain Chrysler, but once they’ve picked all the meat off, they will discard the bones (employees, stakeholders, etc). Cerberus has bought many distressed companies for cheap and led them into bankruptcy, where they can slide meat off more easily.
Happy Holidays Cerberus and Junya!