Now that I think about it, why should taxpayers foot the bill for an investment gone bad? Cerberus Capital Management has plenty of profits in their other investments. Why should we support Dan Quayle and John Snow’s extravagant lifestyle? Digging a little deeper, Cerberus also owns 51% of GMAC – the financing arm of General Motors.
From Hoovers Online:
Named after the mythical three-headed dog that guards the gates of hell, Cerberus Capital Management has become a driving force among private equity firms. One of its more recent moves is the purchase of 80% of Chrysler from Daimler in 2007. Cerberus was also the lead investor of a group that acquired 51% of GMAC, the financing arm of General Motors. The company also owns bus manufacturer Blue Bird and car parts maker TA Delaware (formerly Tower Automotive). Other holdings include a 45%-stake in Japanese bank Aozora, real estate services firm LNR Property, and a 52%-stake in ACE Aviation Holdings, the parent company of Air Canada.
Cerberus has become heavily involved in the automobile industry because it believes that the sector has long been undervalued. In addition to its GMAC, Chrysler, and Tower Automotive holdings, the company now has an interest in CTA Acoustics (automobile insulation), Guilford Mills (automotive seating products), and Peguform Group (plastic auto interior and exterior parts).
A key to early success for the Cerberus-Chrysler deal may well be found in its new labor agreement with the United Auto Workers (UAW) union. While Chrysler has already announced plans to reduce its workforce by some 20,000 and to shutter at least one manufacturing facility, its biggest battle could still be to reduce labor and associated health-care costs.
Louise Story wrote:
Last year, Cerberus and about 100 co-investors bought 80.1 percent of Chrysler for $7.4 billion from the German carmaker Daimler. It also bought a controlling stake in GMAC, the finance arm of General Motors. Since then Chrysler has eliminated more than 30,000 jobs and struggled to keep itself afloat while its sales have plummeted. Cerberus is pressing to have Chrysler merge with G.M., but G.M. has said a tie-up is off the table. Chrysler is asking the government for $7 billion to get through the next few months.
Cerberus, named after the mythical three-headed dog that guards the gates of Hades, has a fierce reputation on Wall Street. Many bankers and investors are reluctant to talk openly about the company, which is renowned, even feared, for its hard-nosed deal-making.
But Cerberus is also pursuing its interests aggressively in Washington, where some lawmakers have questioned why the government should assist the privately owned Chrysler. In addition to Mr. Snow, the firm’s chairman, Cerberus’s Washington hands include Dan Quayle, the former vice president, and Billy J. Cooper, who has worked as partner at the lobbying firm Patton Boggs.
The firm has also hired Arnold I. Havens, a former general counsel of the Treasury Department; John B. Breaux, a former senator from Louisiana; David Hobbs, former assistant to President Bush for legislative affairs; and Christopher A. Smith, former chief of staff in the Treasury. So far this year, Cerberus has spent nearly $2 million on lobbying, while Chrysler has spent $5 million, according to Senate records. Ford has spent more than $5 million and G.M. $10 million.
and I’m with Representatives Maxine Waters and Elijah E Cummings:
But some lawmakers have begun voicing concern that bailing out Chrysler would amount to bailing out Cerberus. On Friday, Representative Maxine Waters, a California Democrat, pointed to Cerberus’s riches. “It seems to me that Cerberus is doing pretty well,” she said.
In an interview, Representative Elijah E. Cummings, a Democrat from Maryland, said he thought Cerberus should put more of its own money into Chrysler before asking for taxpayers’ help.
“I’m not saying they have to get all the money from Cerberus, but at least show a good faith effort,” Mr. Cummings said. “Chrysler should come back to Congress and say, ‘This is what we’ve asked Cerberus for, and this was their response.’ I think the public is due that.”
and especially because Cerberus opposed raising fuel efficiency standards:
“They are very, very well-connected,” said Harry Cendrowski, a consultant and co-author of the book “Private Equity: History, Governance and Operations.” Senator Bob Corker of Tennessee can attest to that. Last year, he was on vacation when his phone began ringing. It was Mr. Snow, and then Mr. Quayle, both calling on behalf of Cerberus. They wanted the senator to know that Cerberus opposed new fuel efficiency standards, Mr. Corker recalled. Days later, Mr. Feinberg visited Mr. Corker’s Washington office. Mr. Corker told Cerberus he was unmoved.
“I really did feel badly for these guys,” Mr. Corker, a Republican, said. But others point out that Chrysler landed on Cerberus’s lap practically free. The price it and its co-investors paid for their stake was roughly equal to the book value of Chrysler Financial. The car operation was just icing.
Mr. Snow and Mr. Feinberg declined to comment for this article. Cerberus does not have much of its own money riding on Chrysler and GMAC. The two investments amount to about 7 percent of its assets under management, and this past July Cerberus and its co-investors lent $2 billion to Chrysler. But its reputation is at stake, and it is eager to keep Chrysler and GMAC out of bankruptcy.
Talk about socialism! Republican style socialism, also known as public costs and private profit.