Cerberus Has Sold Off Most of Chrysler LLC Stake

By Brendan Moore

06.02.2008

Cerberus has also sold over 50% of GMAC as well

Chrysler has already quietly unloaded over half of its ownership of Chrysler LLC and GMAC, the Financial Times reported this morning.

The timing isn’t yet clear, but the paper is reporting that the shares were sold to approximately 90 investors recently.

The newspaper said investors in the group that bought stakes in the automotive assets from Cerberus included Cerberus-controlled Aozora Bank of Japan, Avenue Capital, Cyrus Capital Partners, Franklin Templeton Investments and Oak Hill Advisors.

Both Chrysler and GMAC have turned out to be bad deals for Cerberus so far; Chrysler because of the poor automotive market and GMAC because of their losses related to their core mortgage business.

Cerberus invested $7.4 billion USD total in both businesses, but apparently has sold off most of the equity to other investors in a move that will mitigate potential losses further out. Oh, and a minor detail here; Cerberus earned over a billion dollars in fees as it offloaded their risk to the other investors.

Neither Chrysler or Cerberus commented on the report.

If true, the fact that Cerberus has reduced its stake in Chrysler so dramatically will produce a frenzy of chatter about just what sort of future Chrysler has as an independent auto manufacturer. It certainly looks like Cerberus is trying to make as graceful an exit as possible from what they now have deemed a bad investment.

Does that mean that the company is now open to selling Chrysler to another automotive company? There could be some buyers; Renault-Nissan, perhaps, or possibly a Chinese company or an Indian auto concern. And if that doesn’t prove to be a viable course of action, will Cerberus break up the company piecemeal so as to extract the maximum value from their failed business venture?

Whatever the course of future action, today’s news puts Chrysler’s future on very shaky ground.

COPYRIGHT Autosavant.net – All Rights Reserved

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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3 Comments

  1. This wouldn’t surprise me because Cerberus is not in it to be an owner and to make cars, they’re into Chrysler because they saw a chance to make money. That fact that Chrysler makes cars is irrelevant to Cerberus. So, if they can give up equity and make more money (or lose less money) they’re going to do that. I wouldn’t be surprised if they did it sometime ago, when the market started turning at the end of last year.

  2. Chrysler has already refuted this story saying that this was done when they bought Chrysler, not recently.

  3. Cerberus/Chrysler says nothing to see here, let’s move on, but you know there’s more to it than that. You have to know that Cerberus being the smart guys they are, have laid off as much exposure as possible concerning their Chrysler holdings. I’m sure they’ve been selling all along, and then when Chrysler is sold either whole or in chunks, they throw their last little bit of equity in with the deal, and say, so long, suckers!

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