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Cerberus May Sell Chrysler In Pieces

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The Associated Press

The Tampa Tribune

Published: October 23, 2008

DETROIT - Chrysler LLC could be sold in pieces to other companies as its majority shareholder Cerberus Capital Management LP seeks to exit the auto business, said a person briefed on discussions.

Cerberus, the New York-based private equity firm, has been shopping the beleaguered automaker to General Motors Corp., the combined Nissan Motor Co. and Renault SA and other companies.

Many combinations are being discussed, said the person, who asked not to be identified because the discussions are private.

Chrysler spokeswoman Shawn Morgan and Cerberus spokesman Peter Duda declined to comment.

Cerberus' efforts to exit the auto industry have been widely reported in recent weeks. But speculation has swirled over what shape the final deal might take. One deal being discussed reportedly calls for Cerberus to hand over Chrysler to GM in exchange for GM's 49 percent stake in GMAC Financial Services.

GM sold a 51 percent stake in its finance arm to Cerberus in 2006. Cerberus also would get an equity stake in GM, hoping for a good return if GM recovers when U.S. auto sales rebound from a serious slump.

GM is said to be interested in Chrysler for its cash. Chrysler, whose sales fell 25 percent in the first nine months of the year, reportedly has about $11 billion available.

It also has debt, but the amount hasn't been disclosed because Chrysler is a private company. Cerberus bought an 80.1 percent stake in Chrysler from Germany's Daimler AG in a $7.4 billion deal last year.

Chrysler's cash may not be enough for GM to take on its money-losing rival, and the federal government may be involved in an effort to inject cash to prop up the deal.
Auto industry analysts said financing for the deal remains a key element to any final deal. Citi Investment Research analyst Itay Michaeli said in a recent report that a combined GM and Chrysler would need at least $10 billion to $12 billion in fresh liquidity. But this could pose a problem given turbulence in capital markets, Michaeli said, making it "feasible that the government could step in to provide support."

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