Bailout Means Look Into Cerberus and Chrysler

by Justin Berkowitz

December 19th, 2008 12:24 PM

bailout means look into cerberus and chrysler

Ever since Cerberus took ownership of Chrysler, it has been lights out at what was once America’s third-largest automaker. With Daimler holding on to a 20% stake in the firm, some small news was public. And Chrysler did report its [dismal] sales each month. But that’s about it. The public relations folks were rolled into human resources. Cerberus played its cards close to its chest. And this was what we all expected from the beginning; it was at least in theory one of the major high-points of Cerberus taking over as Chrysler’s owner. They didn’t have to keep an open book, report financial data, and be subject to the short-term goals of shareholders. But it has also meant we have no idea what is going on inside this big company with tens of thousands of employees. Now that you and I are non-voting shareholders, we should have a better idea.

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4 of 18 comments

Landcrusher on Dec 19, 2008

It's always a bad sign when PR gets cut back or eliminated. Unless some firm has too much PR for their size, they are usually doing it because they prefer less transparency, and/or they don't give a rat's arse what anyone thinks. PR doesn't just spin for the press, they also advise management to prevent boneheaded moves that may play poorly in spite of being reasonable business decisions (jetgate). They also usually control the charitable giving, which can prevent it from being abused by upper management. When you consider all the PR functions, and then you see a company dump them, you can usually predict bad news will eventually catch up with them. You should dump shares and business ties quickly when this occurs.

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Justin Berkowitz on Dec 20, 2008
autonut : It is nice to be young and idealistic! For me, idealism ended a long time ago. I think it was when I started writing on TTAC and discovered that there were adults outside of universities that claim to be libertarians. Chrysler is a private company. Why anyone would imagine that because it got business loan it will open books? Because that's how loans usually work. You have to get a credit check before getting a car loan. Businesses look at each other's books before doing a business deal (due diligence). The creditor gets to look at the debtor's books. It's just that in this case the creditor is the US government. As I said in the original post, I am not claiming that overnight Chrysler goes from opaque to transparent. All I am saying is that we will have "a look" into Chrysler. As in, more than we have now. And who said that there is only one set of books? And who knows how those books are kept? The days of mob bookkeeping are long gone. They were done even when I studied this crap back in law school. We live in the era of Arthur Anderson bookkeeping now. GM is public company and books are open and no one had idea 12-15 months ago that they would be bankrupt today. And GM has auditing accounting firm and tax advisory accounting firm and neither one saw anything coming. Add to that 3 credit agencies. Now who's being overly idealistic? A minute ago you were talking about Chrysler cooking the books. What makes you say GM didn't do the same thing with theirs? The credit agencies have no credibility since they botched dozens of ratings over the last decade in an attempt to see the economy grow. Where were they on Lehman? As for nobody seeing it coming, LOTS of us did. Farago published GM Deathwatch 1 in April 2005.

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Jkross22 on Dec 20, 2008

@Justin, There is no evidence available that indicates scrutiny is being applied to ANY of the TARP money. If there is, I would be excited to learn of it. The same appears to be the case here with the money grab by GM and Chrysler. Bush mumbled something about no more private jets or job banks and a vague reference to limiting executive pay, but from what I understand, it's just talk. Those are not legal conditions that are part of the $17B "loan". By the way, what are the repayment terms on this "loan"? What interest rate is being paid? The game of smoke and mirrors continues on the taxpayer dime.

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KalapanaBlack on Dec 20, 2008
Tiger Commanche : December 19th, 2008 at 1:48 pm ...does Chrysler even have any long term products in the pipeline at all? They have a V6 engine of more than three liters in development. Due out just in time for 87 octane to reach $3/gal. again, doubtless. They also have... well... No, I guess that's just about it. Oh, the enigmating, theoretical, pipe-dream replacement for the utterly failed Avenger/Sebring midsize program, the existence of which seems only to be bi-monthly press releases mentioning the supposed program's continued progress in laughably abstract terms.

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