August 31 2009
A Motown headache for Cerberus
If theres any lesson from the downfall of Detroits carmakers over the past several years, its that its that the smart money cant find an easy solution to Motowns woes. When private equity giant Cerberus Capital Management said it would buy Chrysler and its lending arm, Chrysler Financial Services, from former parent Daimler AG of Germany in May 2007, the idea was that the financier could bring better management and turn it around. With better cash flow management and the cut-cutting eye of former General Electric executive Robert L. Nardelli, Cerberus could strip out the excess and flip a healthier company a few years later for a profit. As a backstop, Cerberus bosses figured that the loan portfolio at Chrysler Financial alone was worth nearly the $7.4 billion they invested in Chrysler. If the carmaker was a loser, they could make up some losses with the lender.