The New York Times is reporting a deal struck by the Treasury Department and Cerberus Capital Management which will lead to Chrysler’s second failed marriage in three years. Cerberus (and the co-investors it convinced to come along for the wild ride) will give up their 80.1 percent stake in the company. Anyone who thought Rick Wagoner got the bum’s rush at GM can now say, Wow. Obama’s kicking out the whole freakin’ parent company. Cerberus stands to lose billions. Just how many is tough to glean at the moment. Plans to shore up GMAC and Chrysler Financial—Cerberus’ other Detroit darlings—might help them turn some kind of profit in some kind of future. The dog would like to merge the two lenders into a new hybrid financial institution. The feds aren’t all that thrilled with the idea, but who knows. The word “hybrid” usually gets their attention.
This is becoming quite interesting.
Wow! That’s… wild. Can Chryco survive as an entity after all that its been through?
It’d take a miracle and someone who’s a whiz in the auto sector I wager.
The second domino falls over…
The word “hubris” is what should get their attention. The NYT link is worth a read.
If Chrysler goes bankrupt, wouldn’t this be good news for Pyramid or should I say Cerberus Investments.
If the 3-headed dog gave up all that equity, who received it? Daimler? The US government? Fiat?
Of course, it’s a moot point since the company is bankrupt and the shareholders will get exactly 0c on the dollar.
Good. Its about time. Those jack-asses at Cereberus have no idea what the hell they are doing with a car company. They have also run GMAC and Chrysler Financial into the ground and let us taxpayers bail them out. I say they need to sell GMAC and Chrysler Financial. The government broke the rules for them to become a bank. Great. Now we are paying for it. In addition, GMAC is now killing GM dealers for GM. Give GMAC back to GM and make them pay to buy out dealers like they are supposed to do. No more tax dollars for Cerberysler/GMAC. Let them all go bankrupt and the assets can be bought for pennies on the dollar in a liquidation.
Don’t forget Cerberus has stripped most of the land assets from Chrysler. The only thing left is people and ton of debt and other financial obligations.
lbc_conejo stole my question. Where did Cerberus’ equity go? Or, to put it more simply, who exactly owns Chrysler now?
Don’t feel too bad for Cerberus – The billions they are losing is on paper only. They are getting a fair price – Daimler has long since written the value of their Chrysler stake down to 0.
And if all they are losing is what they put in, Cerberus is getting off light. Lenders and bondholders (and ultimately the US taxpayer) is going to take a bath on all of Chrysler’s debt.
I always wondered how Cerberus got talked into buying a car company? Must have been over a lot of drinking thanks to Daimler’s credit card.
“First, get my friends here another round of drinks on me!” said Dr. Zetsche.
“Now how would you guys like to own Jeep! Think of it! I’m sure you guys as boys always loved playing with trucks!”
“Ah, don’t worry about the UAW or what we’ve done to the company (cough cough). Just think of playing with trucks!”
“Time for another round!” (lol)
Break it apart!!!!
Sell off Jeep to Mercedes!!!!
As much as I’d like to believe these slimy people will take a bath, I don’t. This is what these guys do all day long. Buy something, with other people’s money to the extent possible, skim, drain and scrape off any value and offload the carcass. Of course they’re going to have their dour game faces on until they can get away and count the money they made. They’ve been able to see what’s coming way before anyone else involved and move the pea from shell to shell until it’s under the one they walk away with. But we can wish.
Cerberus has held on to the blades (finance) while palming off the production of the razors (cars) onto others.
Just what did they do with the real estate? I’ll bet when we see the books a few months from now in Ch7 Chrysler has been paying excessive rent to another Cerberus entity.
I know Cerberus pulled a similar LeaseCo + OperatingCO move with Mervyns. The high rents that the OpCo paid to the LeaseCo were a factor in their demise.
Cry-sler will not see Memorial Day as a going concern.
I read about this two days ago. My biggest wonder: Who the hell is going to end up with Chrysler now? Actually, come to think of it, this may be the beginning of American Leyland as we know it…..
I’ll admit, this does sound very gratifying. I would love nothing more than for Obama to stick it to Cerberus, but Ceberus’ stock in Chrysler was worth less than zero, much less. They’ve been trying to get out of Chrysler for a while now. Besides, Cerberus bought Chrysler with OPM. Obama just did them a huge favor.
RedStapler,
It’s already been reported that Chrysler is paying excessive lease costs.
I still want to know what happens to all the debt and obligations if Cerberus just walks away from their equity? Who owns the corporation, and who then files for bankruptcy?
I suspect that the next round of equity owners in Chrysler will be the UAW through a VEBA contribution, Fiat for no cash, outside bondholders in a equity-for-debt swap and the US Treasury in a similar equity-for-debt swap. Right now, the US Treasury is probably the biggest lender Chrysler has. I’m guessing that this is part of the deal being negotiated right now.
Nardelli and Press are surely out the door very soon. Nardelli never had any business getting the CEO job, and Press must be kicking himself silly for giving up a great career at Toyota for this. Sometimes you go for the gold ring and end up with nothing.
Let me at it….give me a few financial whizzes and I’ll run Chrysler like no other car company ever..and you will see some damned competitive cars toute suite…
I was talking with a Chrysler friend the other day and we agreed that if you had the Chrysler Minivans, the Jeep line, the ‘normally’ profitable Ram line, Sprinter line of vans, the next 300-Charger and the new Challenger you would have the nucleus of pretty darned good car company…if you had FIAT design your small cars for you with turbo-diesels, high mileage gas sippers with brilliant packaging you might just have a very formidable car company. I stress Might.
Stu Sidoti
I agree with you and have been harboring similar thoughts. Chrysler is down and will be out soon without the right intervention and I guarantee that Cerberus is not the right intervention (or Daimler either). It’s still salvageable but needs a complete remake by people who are car people and are willing to take on the challenge and the headaches that is the auto industry today. And besides that intellectual and managerial commitment, there needs to be a lot of capital, but the basis is there.
I have my doubts about Fiat as the right suitor however, their record leaves a bit to be desired…..
This is just another nail in the coffin. There’s no way Chrysler bounces back, and Fiat’s got to be rethinking the whole “partnership” thing. When the 2010 models come out, I can’t honestly see Chrysler having anything to show. I expect them to be liquidating ’08s and ’09s.
The key thing I like about FIAT is that they are not the arrogant asses that Dumbler is. I don’t think they will come into Auburn Hills and say “let us show you how to run a car company, ja”. I have hopes that they will look at what Chrysler can do for them as well as what they can do for Chrysler. If Dumbler had done that Chrysler AND Dumbler would be in better shape today.
First, Ceberus didn’t buy chrysler, they got it for a gift from Daimler. This was a heads we come out even, tails we make some serious money selling out at a profit. So this will be the heads scenario. As to the future, without either uncle Sam or some other cash rich owner, who pays to have chrysler overhauled? You can’t just start making Italian cars over here: a. they are not federally certified, b. chrysler plants can’t build them with their present tooling, c. the models from Italy may not size up with US competition d. you need big promotion money to start new brands in the US. e. you than have to hang around while your new models crank up by getting public acceptance. Two years for all of this would be if there was unlimited money available (tens of billions). Didn’t Fiat say they aren’t investing any money in chrysler? Who keeps chrysler alive long enough for it to gamble on these new products?
amadorgmowner, well said. Cerberus had no business in the car business. The pundits get on TV and say with this and that, Chrysler could be fixed. What they don’t say is that the company is not being run with the intention of actually designing and building cars. It was glaringly obvious when Chrysler released the photoshopped pictures of the 2010 models that they had nothing.
The Fiat deal will happen just like the Chery deal and the Nissan deal. One year after the announcement, nothing will have happened and they will announce a new partnership with Lada (this is assuming that Chrysler has not been liquidated by then).
@windswords:The key thing I like about FIAT is that they are not the arrogant asses that Dumbler is. I don’t think they will come into Auburn Hills and say “let us show you how to run a car company, ja”.
Unfortunately, I work for a company that was assimilated into the FIAT Borg. They are, and they do.
FIAT CEO even said they wouldnt be able to have FIAT cars in the US until 2011 anyway. Why would any sane company take over Chrysler in its current existence?
Here’s an idea (tongue in cheek)
American Motors Corporation was “borged” into Chrysler in 1987.
Re-establish American Motors Corporation, after a Chapter 11 of Cry-slur LLC, removing all prior ownership and debts.
Remind Cerberus that an auto maker can’t function without an engineering center and ask them to give the new company the Auburn Hills center, as a penalty clause / means of getting off pretty much otherwise scott-free.
Provide a one time loan at very low interest rates, sufficient to carry the company for about 3 years (i.e. sink, or swim).
Tell the dealerships that only 5 star dealers are now elible for the sale of Jeep and Dodge vehicles, as well as AMC vehicles (ex-Chrysler vehicles). Dump the Chrysler name; it is tarnished.
AMC cars would be the lower priced line.
Bring back a few interesting and memorable cars in a sort of semi-retro fashion; Gremlin sub-compact coupe, Pacer bubble car compact hatchback, Hornet compact cars, Matador based on the upcoming 200 and Ambassador, based on the ex-300 body shell. Maybe bring back the Javelin name (based on the Challenger, reskinned).
Dodge would be minivans and trucks, as well as performance cars (Charger, Challenger). Jeep would be…. Jeep.
Then actually build the things in North America.
For the mid-sized car, dump the front wheel drive Sebring/Avenger platform and build the cars on a cut-down 300 platform, with V6’s. Think outside the front wheel drive box.
Just a few thoughts – outside the box.
I suppose it is too much to hope for but let’s hope Jeep finally dies along with Chrysler. Jeep has killed everything it comes into contact with.
The U.S. Army doesn’t want them, the U.S. Border Patrol doesn’t want them, we tree huggers don’t want them, people who don’t like sending oil money to Saudi Arabia to finance the terrorists who kill our troops don’t want them, and anybody who understands aerodynamics thinks they are an old joke.
Die Jeep Die.
They are getting a fair price – Daimler has long since written the value of their Chrysler stake down to 0.
Exactly. Chrysler is bankrupt. The liabilities are greater than the assets. So there is no equity left. Cerberus isn’t getting stiffed — there’s no value left in Chrysler.
Daimler pays $36b for Chrysler, injects capital while they bleed cash, and then sell it to Cerberus for $7b but not before putting in another $8b to cover outstanding debt and pension costs.
This has to go down in the history of business as one of the worst, if not the worst, acquisitions.