Stephen Feinberg-Founder of Cerberus Capital Management LLC
Private-equity fund responds to New York Times editorial
March 2, 2009 - 12:43 pm ET
Cerberus Capital Management LP wants more federal loans for Chrysler LLC in order to avoid "excessive risk-taking" that contributed to Wall Street's demise, Cerberus' COO said today in The New York Times.
Mark Neporent, COO of the private-equity fund that owns 80.1 percent of Chrysler, made the comments in a letter responding to a critical Times editorial last week.
The Times had said Chrysler's restructuring plan submitted Feb. 17 to the Treasury Department was "little more than an assurance that it has already cut costs and accomplished most of what it had to do." The newspaper questioned why Cerberus is not putting more money into Chrysler, as "private-equity funds like Cerberus are supposed to do."
Cerberus intends to protect its investors through rules that limit how much capital it can commit to an individual company, Neporent said in his letter.
"Why should these retirees, universities and charities, simply because they are represented by a private investment manager, be required to take additional risks or make additional investments, when GM or Ford shareholders are not?" he wrote.
Neporent said Cerberus had appointed a "world-class management team" that "has executed many of the hard operational fixes that other American car companies are only now addressing." He reiterated Cerberus' willingness to surrender its equity stake in Chrysler Automotive, convert debt to equity and put $2 billion in other Chrysler interests on a lower priority behind the government's loans.
The Times' editorial had called the 100,000-unit production cut Chrysler offered in its Treasury restructuring plan "paltry." The automaker would then have "capacity to make almost 1 million vehicles more than it will sell this year -- on the questionable assumption that demand, and its market share, will bounce back next year," the editorial said.
The Times suggested the government had good reasons to say no to Chrysler's request for $5 billion in federal loans in addition to the $4 billion it has already received.
"It seems the secretive private-equity fund is willing to gamble on Chrysler's survival with the taxpayer's dime, but not its own," the editorial said. "Saying no might even make Cerberus reconsider and put up some cash of its own."
Cerberus took control of Chrysler in August 2007, appointing former Home Depot CEO Bob Nardelli to the automaker's top position. Nardelli, who had a reputation as a tough cost-cutter, hired former Home Depot executive John Campi as purchasing chief. Campi has since resigned, but not before withholding bailout cash from now-liquidated Plastech Engineered Products Inc. and litigating with other suppliers.
Other changes have included the arrival of Toyota's Jim Press to run Chrysler's dealer and marketing operations and Nardelli's $1.5 billion overhaul of 400 fit-and-finish problems in Chrysler vehicles.