Cerberus Capital Management is offering up its entire share in beleaguered automaker Chrysler in order to allow the automaker to secure its $4 billion portion of the low-interest federal loan granted late last week by the Bush Administration. Cerberus is apparently seeking to focus primarily on the automotive lending market with Chrysler Financial and GMAC.
Automotive News says that the private equity firm is offering up its entire stake in Chrysler to “make the accommodations necessary to affect [Chrysler's] restructuring.”
“They’re effectively offering up the automotive side of the operation,” Lars Luedeman, head of auto analysis for Grant Thornton in Southfield, Michigan, told the publication. “Cerberus is really focusing on the lending side of the automobile industry.”
Cerberus owns a stake in GMAC and Chrysler Financial.
Under the loan announced by President George W. Bush, Chrysler must swap equity for debt to reduce its debt load and to fund about half of its obligations to the UAW’s Voluntary Employee Beneficiary Association trust with stock.
Chrysler Financial will offer $2 billion in order to backstop the government’s loan, which must be repaid by March 30.
“It’s a cooperative way of handing over your position in a company to help it see another day. It’s an industry-supportive move by Cerberus, which is more beneficial to the other OEMs,” Kimberly Rodriguez, also with Grant Thornton, told the publication.
Analysts have said that Chrysler’s future lies in partnerships with other automakers. It currently works with Volkswagen and Nissan , but it will almost certainly need to expand those partnerships and seek others in order to stay afloat.
