Cerberus Now Rumored to Be First in Line for Chrysler

In what is described as a very fluid situation by those close to the matter, the deal for future ownership of Chrysler is now potentially changing again. The private-equity group Cerberus Capital Management is reported by The Wall Street Journal to be the new front-runner in the contest to acquire Chrysler.

The previous leader of the pack, Magna International, Inc. is still a strong contender to buy Chrysler, but is losing ground to the offer being pushed by Cerberus, which is buttressed by the strength of its financial resources, its ability to make Chrysler Financial even stronger by its 51% ownership of GMAC, which is also looking to expand its historical base of business, and finally, the fact that they have hired Wolfgang Bernhard as their advisor. Chrysler senior management is very enamored of Bernhard, regards him as a brilliant hands-on manager, and would like to work with him in any new ownership arrangement with Daimler, since Daimler intends to keep a minority ownership stake in the new Chrysler.

The fly in this viscous ointment is that the UAW does not want Cerberus to be the new owner of Chrysler. Cerberus was the lead in the group of private-equity investors that just recently did the deal to acquire the parts-maker Delphi, and the first thing that happened after the ink dried on that deal was that the new owners wanted wage and benefit cuts from the UAW.

The UAW wants Magna to acquire Chrysler since Magna has a history of good relations with the union, and, is seen as an owner in for the long haul, as opposed to a private-equity group, who the union sees as a temporary (and mercenary) steward of Chrysler.

And since the approval of the UAW is important in any potential deal, the preference of the union could be critical to Daimler’s decision.

Will Magna regroup with an improved offer before Cerberus can get the deal done with Daimler? Or, conversely, is the rumor of Cerberus now being the lead dog just that, a rumor? Hard to say, but there has been a lot of chatter (always from unidentified sources) for the last three days, both in Detroit and Germany, that Magna was not going to be the buyer, that Chrysler had decided to keep Chrysler after all. Maybe this was what was really was going on – a shift in the deal. It’s anyone’s guess at this point. We’ll keep you posted.

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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