Sense on Cents

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. (more…)