What Cerberus' Promise is Worth

17 de may de 2007

<body><div id="article"><tr><td height="28" valign="middle" width="184"></td><td valign="middle" width="185"></td></tr><h1>What Cerberus' Promise is Worth</h1><p>March 17, 2007 (EIRNS)--International Auto Components Group owner and private equity stalker, Wilbur Ross, gave his answer to a question Congressional Democrats' investigators want to know: Cerberus Capital Management will likely sell off Chrysler Corporation's auto operations before too long. Ross, in a March 17 interview with the <em>Houston Chronicle</em> , three days after Cerberus buyout of Chrysler was announced, said that he believed Chinese or Indian automakers would be the likely "end-buyers" of Chrysler. The Wall Street "industrialist" Ross should know: He has become notorious for buying, cutting, and flipping industrial companies in steel, textiles, and recently auto supply. In fact, Ross told the <em>Chronicle</em> he was negotiating to buy part of bankrupt auto supplier Collins & Aikman from... Cerberus.</p><p>Chrysler CEO Tom LaSorda answered another question only one day after the takeover announcement, when he told a journalists' conference call May 15 that he wanted concessions from the United Auto Workers (UAW) this year, in cutting the health benefits of Chrysler retirees.</p><p>Details of Cerberus' financing for the Chrysler buyout are now coming out. Cerberus was provided credit lines of up to $60 billion by five banks, autoindustry.co.uk reported May 17. But a U.S. industrial journalist clarified, that only $5 billion of this is for investment in Chrysler Holdings, the unit Cerberus will set up to run the auto company. Up to $50 billion of it is for refinancing the assets of Chrysler Financial Services, the real prize in Cerberus' and its bank backers' deal. With Chrysler Financial, combined with GMAC of which it already owns 51%, Cerberus will dominate auto lending, having twice as large a share as Ford Credit and much more than any individual bank. This is extremely profitable business, and auto loans can then be "securitized" for a second bite of profits. It could also enable Cerberus/GMAC/Chrysler Financial to raise the effective price of automobiles, by getting rid of the now-universal "automakers' incentives."</p></div></body>