Cerberus high on Chrysler
Chairman says private equity firm has no plans to sell the automaker and can help its turnaround.
Bill Vlasic and Josee Valcourt / The Detroit News
DETROIT -- The chairman of Cerberus Capital Management said Wednesday that the private-equity giant is committed to restoring Chrysler to profitability and has no plans to sell the U.S. automaker.
In his first Detroit-area speech since finalizing the Chrysler deal in May, Cerberus Chairman John Snow said his firm wants to help Chrysler "realize its full potential" rather than fix it up and sell it off.
"We never think about exit strategy," Snow said in a speech to the Detroit Economic Club in Rochester. "It's not even on the radar screen."
Instead, Snow, a former U.S. Treasury Secretary, vowed to aggressively assist Chrysler management in stabilizing the No. 3 Detroit automaker after its troubled tenure as a division of DaimlerChrysler AG.
He said in a post-speech interview that Chrysler's turnaround plan, which calls for $4.5 billion in financial improvements by 2009, could be accelerated under the new ownership.
"I think we can do better than the plan," he told The Detroit News. "That's the basis, that's the skeleton, but I think we can do better than that."
Snow said Cerberus still expects to close on the acquisition in the third quarter of this year, and left little doubt that the firm is eager to bring its expertise to bear on Chrysler.
"We bring fresh eyes to old problems," he said. "We never buy a company for the financial engineering opportunities. Our calling card is operations."
Cerberus, which controls more than 100 companies with combined annual revenues of $60 billion, beat out several other suitors to acquire Chrysler for $7.4 billion from its German parent company.
The deal stirred speculation that Cerberus would overhaul Chrysler and then put it back on the market. But Snow rejected any suggestion that Cerberus was a short-term owner.
In a speech reflecting his firm's feisty reputation, Snow promised that Cerberus would give Chrysler the resources to succeed and also provide leadership on industry issues such as the brewing battle over fuel-economy legislation.
"What Cerberus does is create an environment where good management teams can do good things," he said.
Snow repeatedly expressed support for Chrysler CEO Tom LaSorda and his management team, saying "there's an intensity" among the executives and staff that bodes well for the automaker's recovery.
He said Cerberus expects to form a board of directors to oversee management, and would dispatch some of its 150 in-house executives to help Chrysler as needed.
But Snow offered few details on the day-to-day involvement of former Chrysler executive Wolfgang Bernhard, who now serves as an adviser to Cerberus.
"(Bernhard) is a well respected automotive executive who has good knowledge of the entire industry, and he had a distinguished career with Chrysler," he said. "But Tom LaSorda and his team are running Chrysler."
People close to Chrysler said Bernhard occupies an office at the automaker's headquarters and has been critiquing its product plans, purchasing arrangements and manufacturing processes.
Snow said Cerberus will scrutinize Chrysler from top to bottom as it does any of the companies it acquires. "What Cerberus does is look at every aspect of a company's operations and say, where can we do better?" he said.
In a radio interview this week, UAW President Ron Gettelfinger offered Cerberus a vote of confidence, saying its acquisition of Chrysler was the best possible outcome given DaimlerChrysler's determination to sell the U.S. automaker. After nine years as a unit of DaimlerChrysler, Auburn Hills-based Chrysler also is ready to become more vocal on industry issues such as federal rules on fuel-economy.
Under a Senate energy bill approved last month, mileage standards for cars and light trucks could be increased substantially to 35 miles per gallon by 2020.
The bill has been attacked by domestic automakers as potentially disastrous because of the additional costs that would be incurred to achieve the new standards.
Snow took aim at the bill on Wednesday, saying that Chrysler and other automakers would be unfairly penalized in the overall drive to reduce the nation's dependence on foreign oil and improve the environment.
He said the upcoming battle in Congress could determine the future viability of Chrysler and its domestic rivals, General Motors Corp. and Ford Motor Co.
"That choice is between reasonable legislation that significantly raises auto fuel economy standards, but gives the industry a fighting chance to survive, versus severe legislation that would certainly cripple the industry, destroy jobs and make auto manufacturers in the U.S. uncompetitive," he said.
Snow's grave assessment was disputed Wednesday by the Union of Concerned Scientists, which released a study asserting that a 35 mpg standard would save consumers $61 billion and stimulate the creation of new jobs in fuel-saving technology.
You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com.