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.