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Who and What is Cerberus….??

Posted by Larry Doyle on December 11, 2008 9:05 PM |

While the debate in Washington over a potential rescue package of the domestic auto industry seems to be ending and a short term “bridge loan” is being arranged, I empathize with the innocent laborers and families within these companies and across the industry who have truly suffered from the imprudent management of this business model. One outfit that is heavily involved in this industry, though, deserves no sympathy. Everybody knows General Motors, Ford, and Chrysler, but not many people know of Cerberus Capital Management.

GM and Ford are publicly traded entities. Chrysler, however, is 80% owned by one of the largest private equity funds in the business. If any company understands risk, the cost of capital, business models, restructurings, leveraged buyouts, asset liquidations, return on equity, etc it is Cerberus Capital Management.

While the CEOs of GM and Ford most assuredly have extremely limited to zero means of raising capital at this juncture, to think that Cerberus does not have access to capital is ridiculous. The simple fact is Cerberus “chooses” not to put more money into Chrysler to defend their previous investment.

Over and above that as a private equity fund Cerberus is not required to publish financials. If it does not make your skin crawl to think that this crowd wants our collective money to support their investment, it should.

Let’s take a closer look at Cerberus:

Highlights include:

Chairman is former Secretary of Treasury John Snow.

Majority or significant minority stakes in companies that generate $100bln in revenue.
Philosophy: “encourage our companies to focus on the future through prudent capital investment, R&D, new product marketing, talent development, improved operations, and appropriate strategic acquisitions.

Earlier this fall, it was widely speculated that GM and Chrysler would merge to achieve significant cost savings through layoffs and balances of scale and so GM COULD GAIN ACCESS TO CHRYSLER’S CASH RESERVES.

Why does Chrysler’s CEO Bob Nardelli have his hand out looking for OUR money? Because Chrysler chooses not to defend its investment and inject more capital. In Congressional hearings last week, Chrysler Chief Executive Bob Nardelli was pressed as to why he does not seek help from Cerberus. He said he has, but was turned down.

Read more as to how “Congressman Opposes Chrysler’s Bid for Loans“.

Stop the madness, Nardelli and Chrysler should not even be offered a seat at the table. Congress should mandate that Cerberus OPEN THEIR BOOKS and in so doing if any money is provided to Chrysler it should strictly be done in the form of a totally secured loan against the best collateral (Cerberus’ top companies in their portfolio) and/or only after making sure that Cerberus’ entire equity stake in Chrysler is extinguished.

As this short term bridge loan moves closer to being approved, a “remaining hang-up was over ensuring that Cerberus, the private equity firm that owns Chrysler, would reimburse the government
if the auto company defaults on its loan, according to a Congressional negotiator.” Any banker on Wall St. or Main St. would absolutely require a loan of this nature made to a firm like Cerberus to be “secured”.

STOP THE MADNESS!!! Private equity funds do not deserve public money!!

If Cerberus does not want to defend Chrysler, then let another automotive company take them over through a liquidation process. Believe me, we’ll survive.

Give capitalism a chance!!






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