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March 25, 2009

Cerberus chief: We're hanging on with Chrysler and GMAC

WASHINGTON – The founder and chief executive of Cerberus Capital Management, the private equity fund that owns Chrysler LLC and GMAC, said in a rare interview published today that the firm has “the feeling of a greater calling” with the companies.

But Stephen Feinberg reiterated to the Financial Times that Cerberus could not invest more of its clients’ money into the companies, citing its internal rules.

Between Chrysler, GMAC and Chrysler Financial, Cerberus-managed companies have received $11.5 billion in federal loans to keep the companies afloat. Chrysler has said it needs an additional $5 billion by the end of the month to help consummate an alliance with Fiat S.p.A., and Chrysler officials have also asked for more support for its finance arm.

"We always try to hang in -- but not at the expense of being commercial," Feinberg told the Times. "As far as GMAC and Chrysler are concerned, we will hang in there as long as it takes. There is the feeling of a greater calling."

Prior to its purchase of 80% of Chrysler and 51% of GMAC in 2007, and the economic downturn last year, Cerberus had a reputation for turning around troubled firms. Feinberg said Cerberus had applied those same strategies to GMAC, but that the collapse of the mortgage market outran the changes.

Several lawmakers and outside experts have questioned why Chrysler is turning to the government for help instead of its investors. Feinberg told the paper it would be unfair to the fund’s investors, and violate its rules about how much it can commit to any single investment.

Cerberus and Daimler, which owns the other 20% of Chrysler, have said they would convert $2 billion in Chrysler debt into equity as part of the company's turnaround. Chrysler has also said Cerberus will commit equity to stakeholders such as the UAW as part of its negotiations.

LINK:Cerberus chief: We're hanging on with Chrysler and GMAC | | Detroit Free Press
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