Chrysler exec says Cerberus is in for long term
August 13, 2008
TRAVERSE CITY, Mich. (AP) — Even if private equity firm Cerberus Capital Management LP intends to sell Chrysler LLC in pieces, Chrysler Vice Chairman Tom LaSorda says it won't happen anytime soon.
Cerberus founder Stephen Feinberg has given assurances that the investment firm will stay with Chrysler for the long term, LaSorda said Wednesday. But even if it wanted to sell after owning the automaker for just over a year, now is not the time with the U.S. auto industry in a slump, LaSorda said.
"No one is going to buy a car company like this in the market that its in," he told reporters after speaking at the Center for Automotive Research Management Briefing Seminars in Traverse City. "One could argue is it worth as much as they paid for it initially based on today's market?"
LaSorda said Chrysler's brands — Chrysler, Jeep and Dodge — are worth a lot if they are sold.
"So the bottom line is they're holding on for the long term and we'll see what happens," he said.
Feinberg, LaSorda said, has told top Chrysler managers not to worry about anything other than turning the company around.
"I don't know what happens in three years or what he says in five years or whatever, but those discussions we don't get involved in," LaSorda said. "We're busy enough trying to turn the place around."
Cerberus bought 80.1 percent of Chrysler from Germany's Daimler in August 2007 in a $7.4 billion transaction, ending a stormy nine-year partnership. But since then, the U.S. auto market has tanked, especially truck sales. Chrysler sales are off nearly 23 percent so far this year, while the overall market is down 11 percent.
The Auburn Hills-based automaker has said it's performing ahead of its own expectations, with $11.7 billion in cash on hand at the end of June and earnings of $1.1 billion in the first half of the year before interest, taxes, depreciation and amortization.
That means it is making money from its core business of making and selling cars, but before financial obligations like paying taxes, servicing debt, deducting the value of aging assets and recording expenses that are taken over time.
As a privately held company, Chrysler isn't required to release financial information, and it didn't provide its net income or other details. Daimler AG, which owns the remaining 19.9 percent of Chrysler, indicated through its own financial results last month that Chrysler lost an estimated $510 million in the first quarter.
LaSorda said in his speech that Chrysler has identified more than $1 billion in "nonearning" assets that it intends to sell to generate cash. More than half of those assets have been sold, including a truck plant in Brazil, a design center in California and several small properties near the company's headquarters in Auburn Hills.
But LaSorda would not say what portion of the $1.1 billion in earnings came from asset sales.
LaSorda also said his company will invest $1.8 billion to expand the Jefferson North Assembly Plant in Detroit that now makes the Jeep Grand Cherokee and retool it to make a new car-based sport utility vehicle with underpinnings developed jointly with Daimler.
Speaking at a weeklong industry meeting organized by the Center for Automotive Research, LaSorda said the factory should be retooled by the end of next year and will start cranking out the new vehicles early in 2010. The investment will add 285,000 square feet to the plant and keep more than 400 jobs in Michigan.
The new vehicle will be more fuel-efficient than the truck-based Cherokee and will be equipped with the company's new Phoenix line of fuel-efficient engines.
LaSorda also told reporters the company is on track to start distributing a subcompact car made by Nissan Motor Co. in the fall of 2010. Chrysler is designing and styling the car, to be built on Nissan underpinnings. Chrysler also has agreed to build a full-size pickup truck for Nissan.
LaSorda denied reports that Chrysler is discussing a deal for Nissan to build midsize cars for Chrysler, and he said discussions with the Japanese automaker have stopped at the truck and small car deals.
Work continues on development of a subcompact with China's Chery Automobile Co. with a target of putting the cars on sale next year, LaSorda said.
Chrysler also is in discussions with Russian and Indian automakers about alliances, LaSorda said.
LINK:The Associated Press: Chrysler exec says Cerberus is in for long term
Nitro Year: 2007 (1 of 91,815 sold in 07)
Nitro Model: R/T 4X4 Stone White
CAT-BACK Exhaust, CAI, Projector Head Lamps
Fully-Equipped w/all factory options