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
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)
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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.