Archive for the 'Cerberus' Category
November 20th, 2009 by Bill Cawthon
Steve Rattner, former head of the Obama Administration’s Auto Task Force, said replacing the management team installed by Cerberus Capital Mangement was one of the task force’s objectives in restructuring Chrysler.
Rattner, who was speaking at Council on Foreign Relations-sponsored forum about the global auto industry, told the audience, “We wanted to have a completely fresh management team. You can’t come to any conclusion that management is not a huge ingredient, a huge determinant of success.”
In fact, Rattner also said the task force’s motivation for supporting the Chrysler-Fiat alliance “was frankly to get new management and to get what we thought was one of two or three best management teams in the world.”
Cerberus’ management team consisted of Robert Nardelli, ex-CEO of Home depot, former Chrysler CEO Tom LaSorda and Jim Press, former CEO of Toyota’s U.S. operation. Nardelli left Chrysler when the new company emerged from bankruptcy. He then took a consulting assignment with Cerberus. LaSorda retired from Chrysler on May 1, 2009 and took a job advising Penske Group on the planned purchase of Saturn from GM. Press is due to leave Chrysler at the end of this month.
Bruce Nussbaum, writing in BusinessWeek’s August 2007 edition, said, “Picking Robert Nardelli to save Chrysler is the most bone-headed idea of 2007.”
Apparently the President’s Auto Task Force agreed.
November 19th, 2009 by Bill Cawthon
Chrysler Group may have to cut another 145 dealers unless they can find a new source of financing. That’s because the dealers have been unable to qualify for financing from GMAC, Chrysler’s primary financing source.
The dealers have been caught in the in the transition from Chrysler Financial to GMAC. They have existing mortgages and floorplan debts through Chrysler Financial which refuses to give up its rights to first call on assets. In addition, much of the mortgaged real estate is now worth less than the mortgages. Chrysler Financial is no longer offering floorplan financing for Chrysler products.
Dealers had until the middle of this month to qualify for GMAC funding or obtain ongoing financing from another source.
October 27th, 2009 by Bill Cawthon
The National Automobile Dealers Association says as many as 40 Chrysler dealerships may be threatened with foreclosure because of the ongoing dispute between GMAC and Chrysler financial.
“The parties have taken inconsistent positions and dealers are stuck in the middle,” said Forrest McConnell, an official with NADA. The dealer group says the affected dealerships are viable but may be unable to get floorplan financing since the two finance houses can’t agree on their status as creditors. GMAC assumed the role of captive finance source for Chrysler Group dealers when the automaker came out of bankruptcy. The U.S> government ordered the change because GMAC, due to its status as a bank, had better access to capital than Chrysler Financial, which is owned by Cerberus Capital Management.
The problem is the dealers have existing floorplan loans and mortgages with Chrysler FInancial and have only until the middle of next month to get set up with GMAC for new financing. Without the floorplan loans, dealers will not be able to order fresh inventory. GMAC is asking for more collateral, saying the value of the vehicles isn’t enough, and Chrysler Financial refuses to give up its position as the creditor with first demands on assets.
In better times the dealers might have been able to borrow against the value of their property or get other financing from commercial banks. However, plunging real estate values have left some dealers owing more than their property is worth and, as one dealer noted, “…(T)here’s not a bank on the planet that will loan a dime to any Chrysler or GM dealer.”
October 23rd, 2009 by Bill Cawthon
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.
October 20th, 2009 by Bill Cawthon
Responding to concerns that a lack of financing may cause more Chrysler dealers to close up shop, GMAC Financial Services President Bill Muir says the number of dealers that don’t qualify for new loans through the lender is likely to be small. According to Muir, the vast majority will be approved as GMAC takes over floorplan financing from Chrysler Financial.
Although some dealers have already closed down due to lack of financing, GMAC has declined just 29 dealers who own a total of 41 Chrysler, Dodge or Jeep dealerships because they have insufficient assets and too much current debt to Chrysler Financial to meet GMAC’s funding requirements.
Chrysler purged its dealer rolls last spring, terminating 789 franchises, a cut that is still being questioned in Congress. The company has said the remaining dealerships are critical to its future success.
October 17th, 2009 by Bill Cawthon
Chrysler dealers who survived the purge earlier this year now face a new challenge: getting financing in the midst of a dispute between GMAC and Chrysler Financial. Hundreds of dealerships that Chrysler Group says are critical to its success could go out of business because they can’t get floorplan funding from GMAC until they have settled any accounts with Chrysler Financial.
The problem is which company would have first claim on the dealer’s assets in case of a default. GMAC insists it have the first claim before it will approve financing but the economic downturn has left many dealers without the assets to pay off their existing mortgage and floorplan loans from Chrysler Financial which insists it has the first claim.
One problem is that some pledged assets are not worth what they were when the original loans were taken out. Property values have declined to the point that some dealers owe millions more than their real estate would bring in a sale. In addition, the slowdown in vehicle sales has cut dealer incomes almost across the board.
GMAC became the lender of choice for Chrysler dealers when the federal government intervened last April. GMAC was able to get funding because it was granted bank holding status. Chrysler Financial had applied for similar status but withdrew its application because Cerberus Capital Management refused to comply with federal disclosure regulations for companies with significant ownership. Some industry watchers say Chrysler Financial is being wound down to liquidation or is trying to wrap up all its Chrysler dealer financing by year’s end, though the company denies this.
Dealer caught in the middle have only until mid-November to get financing approved by GMAC and Chrysler Group officials say progress is being made in discussions with the two finance companies. However, dealers who do not have floorplan financing in place by the deadline will no longer be able to order new vehicles for inventory.
GMAC says about half the 1,500 applications for new financing have already been approved and says it has brought in extra manpower to ensure the majority of applications receive action by the November deadline.
September 18th, 2009 by Bill Cawthon
According to the Detroit Free Press, Chrysler Deputy CEO Jim Press owes the U.S. government nearly $1 million in back taxes and the Internal Revenue Service has put a lien on family’s home in Birmingham, Michigan.
A lien notice filed with the Oakland County Register of Deeds says Press and his wife, Suwichada, have an unpaid balance of $947,409.63 from the tax period that ended December 31, 2007.
Press left Toyota in 2007 to become part of the team Cerberus Capital Management hoped would be able to turn Chrysler around. Since Chrysler was a privately-held company, his compensation package was never revealed but was rumored to be in the range of $50 million.
Neither Press or Chrysler spokeswoman Shawn Morgan had any comment on the matter.
