Cerberus is the highly secretive private equity company that owns Chrysler, the ailing American automaker that just scored $4b from the Troubled Asset Relief Program (TARP). Cerberus also owns 51 percent of lender GMAC (soon to be less) and all of Chrysler Financial Services. And a lot of Burger Kings. Anyway, The New York Daily News reports today that “Cerberus says it will invest the first $2 billion of Chrysler Financial profits back into the financing arm’s parent automaker.” WHAT PROFITS? This horseshit comes hard on the heels of Cerberus pledge not to take any profit on Uncle Sam’s forthcoming $4b “investment” in Chrysler. WHAT PROFIT? CEO “Boot ’em Bob” Bob Nardelli and his golden parachuted pals want us to believe that Chrysler is determined to become a profitable automaker. Is there anyone who actually believes that? FYI, make the jump for Cerberus’ reason why Uncle Sam must boldy go where the equity firm fears to tread.
From The Wall Street Journal’s Deal Journal, Dec. 17:
“Cerberus has invested all it is allowed to in Chrysler: The $27 billion Cerberus manages isn’t cash on hand. Cerberus’s charter maintains that the firm can’t put more than 5% of its assets into any one investment; to buy Chrysler in the first place, Cerberus had to seek permission from its limited partners to bend the rules of the charter. To inject more money into Chrysler, Cerberus would have to again seek permission. And the chances are slim that the LPs would agree to invest–and potentially lose–another batch of money on an auto maker so close to bankruptcy precipice that it has hired bankruptcy advisers. Cerberus’s LPs know what everyone else knows: that the financial tsunami of the past few months has wiped even more of the value from auto makers than would otherwise be the case in an economic downturn. ‘The timing of the investment was unfortunate,’ this person said, and Cerberus ‘can’t recover.'”
Says who?
We’ve got this great investment, yeah it’ll be a money pit but don’t worry we won’t spend any of our money on the purchase or rehab.
What if no one pays to fix it up?
We don’t care, not like we’ll have any skin in the game.
Where do I sign?
Robert-
Sit back, take a swig of whiskey or scotch, or whatever you drink, and read what you wrote again.
They’re talking about investing money from Chrysler Financial NOT from Chrysler the Automaker. They’re two separate entities, with two separate accounting books. Since they’re both private companies Cerberus doesn’t have to disclose how much money Chrysler financial has made or lost, so its a bit early to throw up your hands like a drama queen and scream ‘WHAT PROFITS?’.
Droid800 :
Clover coffee. Can’t you tell?
And if Chrysler Financial is making money– which I HIGHLY doubt– why would they offer the profits to Chrysler?
If Cerberus wanted to plow the [alleged] profits from Chrysler Financial into Chrysler, who’s stopping them? And if they do, what do they want, a medal? Oh wait. $4b. Forgot.
Given what we don’t know about Cerberus and Chrysler (e.g. how much they paid for the automaker), I can only assume that this is more smoke and mirrors from a company that specializes in it.
They’re talking about investing money from Chrysler Financial NOT from Chrysler the Automaker. They’re two separate entities, with two separate accounting books. Since they’re both private companies Cerberus doesn’t have to disclose how much money Chrysler financial has made or lost, so its a bit early to throw up your hands like a drama queen and scream ‘WHAT PROFITS?’.
You’re missing the point. The partners of Cerberus could put the parent company’s or their own personal cash into Chrysler if they wanted to.
We know that they have absolutely no intention of doing that. After all, they’re the ones who said “Cerberus is not a deposit-taking institution that can act as an ATM machine for its portfolio companies.”
https://www.thetruthaboutcars.com/bailout-watch-298-why-give-cerberus-federal-money/
Apparently, Cerberus isn’t an ATM…but I am. I have zero percent stake in Chrysler and didn’t put the deal together, yet I have to pony up more cash than the guys who made this happen in the first place.
That doesn’t make sense. At the very least, the feds should have required Cerberus’ partners to match the funds contributed by the government with an equal amount of loans from the partners, plus made them pledge cash collateral to ensure that the government got its money back. They should have something to lose, so that they are motivated to pay it back.
Instead, we have set this up in such a way that the odds of being repaid are about zilch. We got outfoxed. Merry Christmas to us.
@PCH101
No, it seems you’re missing the point. I was making no comment about the bailout or any such matter. What I was commenting about was the knee-jerk reaction Farago was having to something that he completely misunderstood and misinterpreted.
What I was commenting about was the knee-jerk reaction Farago was having to something that he completely misunderstood and misinterpreted.
I’m pretty sure that he understood it. We all know that GMAC isn’t turning a profit. You can’t possibly think that Chrysler Financial is likely making a profit from financing the sale of Chrysler vehicles if the dealers can’t move them and customers aren’t buying them.
Profit = Revenue – Costs. When you don’t want to earn a profit, you can fix that problem by pushing up the costs.
We don’t need promises from Cerberus, we need their money. That shouldn’t come from profits that probably don’t exist and won’t exist, it should come from places that they have it stashed or where they can borrow it, including the parent company and the principals’ personal assets. Pledging profits is as good as saying that the taxpayer is getting nothing and liking it.
Let those bastards fail.
Such small potatoes. the government is pissing away trillions and your worried about a mere 4 billion.
Granted that last year 4 billion might have been considered a large amount of money.
Well, a billion here, a billion there, and pretty soon, we are talking real money.
Pch101 : We all know that GMAC isn’t turning a profit. You can’t possibly think that Chrysler Financial is likely making a profit from financing the sale of Chrysler vehicles if the dealers can’t move them and customers aren’t buying them.
Pretty much my thinking too. Not to mention the chatter (and action?) on bringing back the Sales Bank, and the current shutdown at all Chrysler factories.
It all spells doom for Chrysler Financial, and its pretty hard to believe anything Cerberus says about their secretive basket-swapping.