Two of Chrysler’s top honchos barnstormed through North Texas today, telling the media and more than 200 Southwestern dealers here that “all systems are go” with the automaker. Meantime, Chrysler’s majority owner–Cerberus Capital Management, a private-equity investment firm–has been scrambling behind the scenes to save the company from bankruptcy. After nailing down a $4 billion loan from the feds, Chrysler/Cerberus recently announced a deal in which Italy’s Fiat would take a minimum 35% equity stake in the struggling U.S. carmaker. But when we asked why Cerberus wasn’t ponying up its own dough to save Chrysler–it’s got about $24 billion in holdings, after all–Chrysler President Jim Press said the question may have been prompted by “misinformation.”
“Cerberus has been tremendous in their support and contributions to the company,” Press said.
Cerberus paid $7.4 billion for 80% of Chrysler in 2007. Since then, the private-equity outfit pumped in another $2 billion, wrote off a bunch of debt and has agreed “to not take any financial benefit that results from the loan going forward,” Press said.
Beyond that, he added, “Cerberus is not a private-equity fund; it’s an investment fund.” As a result, he explained, there are strict rules about how the company acts on behalf of its investors, and limits on what can be put into any single investment.
OK; fair enough. So, what’s the game plan going forward?
If the Fiat deal is OK’d, pickup- and SUV-heavy Chrysler’s looking for access to Fiat’s successful small-car platforms. In return, among other things, Fiat would get access to the U.S. automaker’s dealer network to sell some of its brands here. (Fiat’s made great strides over the years, it seems; no longer does the name stand for “Fix It Again, Tony.”)
Then, after submitting a “viability plan” for its survival by the end of March, Chrysler’s hoping to nab another $3 billion from the feds to keep itself going–critics like U.S. Sen. Bob Corker notwithstanding.
Corker’s been skeptical of the automaker bailouts especially in Chrysler’s case, saying taxpayers would be subsidizing a partnership between Chrysler and “a foreign automaker.”
It’s obvious that Press–and Steven Landry, Chrysler’s executive sales VP–don’t take kindly to such criticism.
“Do some research,” Press said. “It’s a common practice among the city, state and federal governments to use taxpayer money as incentives to bring foreign automakers to the U.S. Those funds go directly to foreign companies; in this case, the loan is made only to Chrysler.”
Landry expanded on his boss’ argument.
“A lot of banks borrowed a lot of money,” he said, referring to the federal bailout program for banks. “If you check the equity ownership of those banks, you’ll find that in some cases it’s 100 percent foreign.”
Well, he’s got a point. Now what I want to know is: Where’s the line for my free dough?
Even $1 million would be fine.