The chairman of the private equity firm Cerberus Capital Management LP that is acquiring the Chrysler Group said that he supported tougher fuel economy standards for the nation's vehicles but said that some proposals have been too stringent.
John Snow, 67, the chairman of Cerberus, said that while some measures have been cost-prohibitive and would cripple the industry, the company is prepared to pump capital into the automaker to meet future Corporate Average Fuel Economy (CAFE) standards.
Speaking at a Detroit Economic Club luncheon, Snow said that a measure sponsored by Michigan Congressman John Dingell was something automakers could work with, because it "doesn't include a set of standards that is so one sided and has a risk of sinking the U.S. auto industry."
Dingell, D-Dearborn, and Rick Boucher, D-Va., had proposed increasing fuel economy standards to at least 36 miles per gallon by 2022 and 30 miles per gallon for light trucks by 2025. Dingell has put the measure in abeyance and plans to bring up a fuel economy proposal after Sept 1.
Snow criticized new fuel economy regulations passed by the U.S. Senate, calling them unattainable under present technology and focused too narrowly on the auto industry as a solution to foreign oil dependence and carbon emissions. The bill would raise CAFE standards to an average 35 mpg by 2020 for cars and trucks combined. "The U.S. Senate recently passed what I would call a one-sided approach to fuel economy standards," Snow said. "I say one-sided because automobile use in the U.S. consumes only 20 percent of our national energy usage."
Snow added that Congress needs to understand that automakers must not only meet the demands of good public policy but also the market. "Let me be clear that we understand the need to wean ourselves off of uncertain foreign sources of energy and gain greater energy independence," he said. "As Americans, we understand the value of cleaner air and the need to reduce production of (carbon emissions). But we are also committed to keeping a strong, viable auto industry right here in America with good paying jobs."
Asked about the delay in the sale of the Chrysler division, Snow said that he expects Cerberus to complete the purchase of 80.1 percent of the automaker in the third quarter. The firm agreed May 14 to buy the American luxury arm of DaimlerChrysler AG for $7.4 billion.
Snow said that Cerberus will fix and hold the troubled automaker and has no plans to sell it off. "We never buy a company with an exit strategy," he said. "People say how can you do it? How can you fix companies? Well, the answer is that's what we do. We take companies and rebuild them. That's our expertise."
He noted one of the great advantages a private equity firm offers a company like Chrysler is freedom. "It's freedom for management to pursue their long-term plans outside the glare of public markets, outside the requirements for quarterly earnings, outside the glare of the analysts' report where if you miss the analysts estimates by a penny your stock can tank?" Snow told the crowd.
Snow also noted that the U.S. auto industry is poised for a turnaround. "We want to be there to help the turn and benefit our investors from the turn," he said. The turnaround plan is unstoppable even by the most efficient .
Snow was sworn in as the 73rd U.S. Treasury Secretary in February 2003 and served more than three years in that job under President George W. Bush. He was also the chairman and CEO of the CSX Corp. railroad, where he spent 20 years.
