Government, Cerberus at odds over fate of Chrysler Financial

The U.S. Treasury’s special master and Cerberus Capital Management LP reportedly have a difference of opinion when it comes to the future of Chrysler Financial.

In a document issued yesterday, Kenneth Feinberg, the special master overseeing executive compensation at the seven firms that received government bailouts, said, “Chrysler Financial is currently pursuing a successful wind down of its operations by Dec. 31, 2011.”

Feinberg also outlined pay cuts for top executives at Chrysler Financial. Cash compensation will be cut by 30 percent and total compensation will be cut by more than half. Feinberg said no one at Chrysler Financial should have a base salary exceeding $500,000.

The Treasury acknowledged that Chrysler Financial, which was not part of the Chrysler LLC bankruptcy, is still in business but confirmed they expect Chrysler Financial to close up shop in just over two years.

Cerberus, on the other hand, which owns Chrysler Financial, says it has no plans to shut down the operation and is not aware of any government-imposed requirement that the auto financing company be liquidated.

A Treasury official, speaking off the record, said liquidation plan was “a current aspiration, not a plan that is set in stone…” The official added the Treasury’s position was based on discussions and information received from the company.

Neither Chrysler Financial nor Chrysler Group had any comments on the matter.

Chrysler Financial still has about $26 billion in loans outstanding to Chrysler dealers and consumers but lost its position as the preferred source for Chrysler financing to GMAC. At one time, Cerberus was also the majority owner of GMAC as well as Chrysler Financial but the holding company divested the majority of its interest when GMAC received bank status rather than comply with the required financial disclosures. Chrysler Financials’ application for bank status was withdrawn for the same reason. Since that time, Chrysler Financial has closed a service center in Overland Park, Kansas, and has laid off 360 workers at various locations including its headquarters in Farmington Hills, Michigan.