Cerberus Buy Out of Chrysler Points to Industry Growth Pains - May 17th, 2007
By now we’re all familiar with the broad details of the Cerberus Capital Management “buy out” of Chrysler. As it shakes out, Daimler will swallow profit losses of around $5.4 billion so, in effect, they paid to dump a company for which they shelled out $37 billion just nine years ago. There’s really little way to take the pain out of a situation like that, but the Chrysler deal may actually be just the tip of the iceberg of Cerberus’ robber baron moves on the American auto industry.
Even in it faltering condition, Chrysler is the third largest automotive manufacturer in the United States. Cerberus also owns 51 percent of the financial division of General Motors (GMAC) and is making a $1 billion takeover move on Tower Automotive. (Reportedly the company additionally has its sights on the Delphi Corporation, and Collins and Aikman.)
The private equity fund, headed by financier Stephen Feinberg, has a war chest of $16 billion and may be making a concerted raid on the troubled American automotive industry. (Former Secretary fo the Treasury John Snow was appointed Cereberus’ chairmain in October.) The company’s overall assets are some $25 billion with ownership of fifty entities with aggregate revenue of around $60 billion.
Cerberus has a reputation for cost cutting that may save an industry and decimate its workforce with closings and lay-offs. The company was founded in 1992 and makes a business of buying hard luck entities and turning them into winners — ruthlessly. In addition to Feinberg and Snow, other heavy hitters at Cerberus include former chief operating officer at Chrysler Wolfgang Berhard and David Thursfield, the Ford exec who handled operations outside the Americas and joined up at Cerberus in 2004.
It’s difficult to know how to feel about a company like Cerberus that may well play a hand in turning things around for American carmakers but will undoubtedly place further hardships on the workers in this traditional industry already hard hit by lay-offs. Chances are good union troubles and economic displacement are in the works, yet another growing pain of a 20th century staple economic sector struggling to find its place in the 21st.
Posted on May 17th, 2007 by Shorty
Filed under: general |
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