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Soured Deals Dog Brash Cerberus

Chrysler, GMAC struggles point to problems for private equity giant

By Jim O'Neill,  Newser User

Posted Feb 25, 2008 1:15 PM CST
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(Newser) – The continued struggles of Chrysler and GMAC—two of Cerberus Capital Management’s largest and most recognized purchases—have observers wondering if the private equity darling has lost its Midas touch, reports Reuters. S&P has downgraded GMAC’s credit rating, Chrysler's January sales slipped 12% even as the company set about cutting models and dealerships in an effort to return to profitability.

Cerberus contends Chrysler and GMAC have good long-term prospects, but the subprime contagion has infected both investments as credit markets tighten and consumers rein in spending. GMAC and mortgage unit Residential Capital lost a combined $6.7 billion in 2007. “GMAC could run into substantial difficulty,” said Cerberus founder Stephen Feinberg.

Unsold 2008 Jeep Wranglers sit at a Chrysler/Jeep dealership in the southeast Denver suburb of Centennial, Colo., on Sunday, Feb. 3, 2008. When thousands of U.S. auto dealers gather in San Francisco this weekend, much of the talk will be about just getting through 2008. The obstacles include a...
Unsold 2008 Jeep Wranglers sit at a Chrysler/Jeep dealership in the southeast Denver suburb of Centennial, Colo., on Sunday, Feb. 3, 2008. When thousands of U.S. auto dealers gather in San Francisco this...   (Associated Press)
Unsold 2007 300 sedans sit at a Chrysler dealership in the southeast Denver suburb of Centennial, Colo., on Sunday, Feb. 3, 2008. Chrysler LLC plans to significantly reduce its product lineup and number of dealerships as the automaker rolls out a new corporate initiative, a Chrysler dealer in Texas said...
Unsold 2007 300 sedans sit at a Chrysler dealership in the southeast Denver suburb of Centennial, Colo., on Sunday, Feb. 3, 2008. Chrysler LLC plans to significantly reduce its product lineup and number...   (Associated Press)
Chairman of Cerberus Capital Management, USA, John Snow gestures while speaking during a seminar at the World Economic Forum in Davos, Switzerland, Wednesday Jan. 23, 2008.
Chairman of Cerberus Capital Management, USA, John Snow gestures while speaking during a seminar at the World Economic Forum in Davos, Switzerland, Wednesday Jan. 23, 2008.   (Associated Press)
The Chrysler name and emblem hangs on the side of the building at a Larry H. Miller dealership, Saturday, Feb. 11, 2006, in Sandy, Utah. Private equity firm Cerberus Capital Management took control of Chrysler Group on Friday, Aug. 3, 2007 in a $7.4 billion deal designed to set...
The Chrysler name and emblem hangs on the side of the building at a Larry H. Miller dealership, Saturday, Feb. 11, 2006, in Sandy, Utah. Private equity firm Cerberus Capital Management took control of...   (Associated Press)
The company logo shines off the grille of an unsold 2007 Aspen sports-utility vehicle outside a Chrysler-Jeep dealership on Nov. 26, 2006, in the east Denver suburb of Aurora, Colo. EU regulators on Tuesday July 3, 2007 cleared Cerberus Capital Management to buy most of the money-losing Chrysler car division...
The company logo shines off the grille of an unsold 2007 Aspen sports-utility vehicle outside a Chrysler-Jeep dealership on Nov. 26, 2006, in the east Denver suburb of Aurora, Colo. EU regulators on Tuesday...   (Associated Press)
Chrysler LLC Vice Chairman and President Jim Press is interviewed at the automaker's headquarters in Auburn Hills, Mich., in this Oct. 1, 2007 file photo. Press on Friday, Feb. 8, 2008 said the automaker's rejuvenation plan could include jettisoning some dealers and cutting its product lineup by as much as...
Chrysler LLC Vice Chairman and President Jim Press is interviewed at the automaker's headquarters in Auburn Hills, Mich., in this Oct. 1, 2007 file photo. Press on Friday, Feb. 8, 2008 said the automaker's...   (Associated Press)
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GMAC to slash loactions, workforce
Associated Press

Chrysler to cut models, dealerships
Associated Press

 
private equity • Chrysler • Cerberus Capital Management • General Motors • Stephen Feinberg • GMAC • AerCap Holdings • Teleglobe International

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