Industry reports say Cerberus will announce its purchase of the Chrysler/Dodge/Jeep divisions of DaimlerChrysler as early as Monday, May 14th. Who? Cerberus is one of those Wall Street investment firms which buy companies, freshen them up then sell them for profit, if they can. Implicit in these purchases is usually a whole lot of lay-offs, so don't expect the United Auto Workers to stand still for this sale, if indeed it is near completion. At least, to some degree, it would appear that if the purchase does happen, and that could take months or even a year or more to sort out, Chrysler would become an "American" company once again, with profit staying in this country, rather than winging its way east to Germany, as it has been for the past decade or so.
The Wall Street Journal said Chrysler Chief Executive Tom LaSorda would continue to run the company while former Chrysler chief operating officer and Cerberus adviser Wolfgang Bernhard would not have an executive role, but could have a board seat. The paper also said that Daimler would keep a minor stake in the business.
The Wall Street Journal also reported the proposed deal calls for forming a new company to assume the pension and health-care liabilities. Cerberus also is expected to make a substantial payment to DaimlerChrysler, the paper said, citing people familiar with the matter.
New York-based Cerberus is a private investment fund that has built a huge private equity and hedge fund
practice.
It does have some experience in the auto business: General Motors agreed in April 2006 to sell a 51 percent stake in its financing arm, General Motors Acceptance Corp., to a consortium led by Cerberus in a deal worth about $14 billion.
Private equity firms buy controlling stakes in companies, restructure the businesses, and typically sell them two to four years later. They borrow around two-thirds of the money to make their purchases.
Any tension between Cerberus and the UAW would spill over into a deal with Chrysler, where the UAW membership is strong. The union has said that it wants a corporate or "strategic" buyer for the company and not a private equity firm.
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