Are they nuts? Cerberus due to take on massive pension liabilities http://www.marketwatch.com/news/sto...x?guid={4AD60D92-DDC1-44F3-BD8A-4F425726D1D0} Why Daimler wants out: http://www.247wallst.com/2007/05/chrysler_why_wo.html
Yes, totally and completely nuts. This must be a top! When someone will not only buy a piece of shit company, but smile while taking on liabilities galore, money is simply too easy to borrow. If money were this easy to borrow, you'd see people who couldn't afford it buying 6 bedroom houses and $50k SUVs when they only make $65k/year...oh wait, wasn't that happening in California, Florida, and a few other places until just 2 or 3 months ago?
A big scalp for private equity Posted by Daniel Altman in Doing the business The purchase of Chrysler from DaimlerChrysler by Cerberus Capital Management, a firm based on Park Avenue in New York, wonât just be the end of a cautionary tale for transatlantic mergers. It will also be a high-profile test for the private equity industry. The latter has been getting a bad name lately, in part because private equity groupsâ buying sprees have brought to mind the leveraged buyouts of the 1980s. Some of those buyouts released value that was being wasted by bad management, but virtually all of the big ones resulted in mass layoffs. Will the same happen this time around? Lost a bit of shine. (David Zalubowski, File/AP) Cerberus may simply be trying to buy Chrysler at a bargain price and then sell it on later. But unlike leveraged buyout firms, private equity firms often keep their investments for the long term. Cerberus might actually think that it could add some value to the American automaker. If it doesnât - or if it liquidates the company - it could be a very public black eye to the whole industry, regardless of whether the decision makes business sense. Chryslerâs enormous losses suggest that there is indeed some work to be done. The company may be operating beyond its most efficient scale. But does Cerberus, whose major investments include the Fila sportswear brand, know anything about running a car company? Does it need to?
Maybe Cerebus is thinking ahead and anticipating that the Democrats will take the White House in 2008 and force through socialized medicine. That could be an enormous windfall for domestic auto manufacturers, provided it let them off load their health care obligations to the government. Ironically, the head of Cerebus is John Snow, a former Bush cabinet officer.
It's amazing how views shift over the years. Check out the "experts" praising the merger in 1998 http://www.pbs.org/newshour/bb/business/jan-june98/benz_5-7.html Who's banking on this? Investment banks. The boyz at GS, LEH, MS et al. are the laughing third. They consulted on the merger 9 years ago and now consult selling the spin-off
I now think that any remaining US based Chrysler production plants will now be eventually shut down because of this.
That's an interesting angle. Maybe then Cerebus would bail out by doing an IPO that goes through the roof.