From the AP: Equity firm Cerberus likely buyer of Chrysler
- Chrysler lost $1.5 billion last year and plans to shed 13,000 jobs.
- Other suitors included, Magna International, GM, and Blackstone Group. Kirk Kerkorian also had indicated an interest in the company.
- Daimler acquired Chrysler in 1998 paying $36 billion.
At first blush, it is interesting that anyone would want to take on another American car maker in trouble. None of the "Big 3" seem to be making it at the moment. GM, Ford and Chrysler all have very similar problems, expensive pension and medical benefit plans, high labor costs, union issues and dwindling demand. I, for one, would walk, no run the other direction. But wait. The name of business is risk, right? Calculated risk, yielding a big pay off.
Glancing at the list of other companies in the Cerberus portfolio it becomes clear that they are diversified and taking calculated risks and sector bets. It also appears that when taking over the companies they are, they are looking at the management team and keeping them in place. That makes some sense, too. Work with those already working towards a solution.
This seems smart to me. The bigger issue is, in my mind, is can they make the turn around quickly enough. There will be room for only one winner, I am sad to say in the Detroit bail out. Someone needs to hit a home run. They need to win and win fast.
Daimler is walking away, I think, because they have such similar problems. They too have pension and medical benefit commitments to their retirees. They also have high labor costs and demand issue. Just as in the dating world, being too much alike can be just as bad as being polar opposites. It is hard and costly to try to solve the same problems oceans apart. Two brands not functioning at their highest potential is not good for shareholders. Medicore results just does not cut it.
This match just might be the winning combination. Money, knowledge and power and a brand name, which used to be allied with European luxury. I can hear the slogans now.