Cerberus Meets With Chrysler, Whats Next?

By: Lauren Woods

People close to DaimlerChrysler AG said that buyout experts from the Cerberus Capital Management met Monday with Chrysler Group executives to evaluate a possible bid for the ailing division of the automaker.

Cerberus, a leading private-equity firm, is the very first investor from Wall Street to visit Chrysler headquarters in Auburn Hills for an in-depth review of the automaker's finances and operations. The second powerhouse is the Blackstone Group. The company is scheduled to meet with Chrysler management later this week. The talks are all intended to suggest the selling price and the sales process itself.

The talks signaled the mounting pressure regarding Chrysler's critical phase. Chrysler was in essence put up for sale on February 14 when DaimlerChrysler CEO Dieter Zetsche announced that "all options" were being considered for the besieged company. Since the company's announcement, more and more suitors are attracted to purchase the ailing division of the German automaker. Big money is involved and many investors have began digging deep into the potential sale of what used to be the third largest automaker in the United States.

Separately, Zetsche said on Monday that he does not rule out selling Chrysler Financial, the finance arm of Chrysler, as it considers all options for the U.S. division. "In case we would decide for an option that would change the current structure for the Chrysler Group, we have the option to do the same for the financial arm or not," he said during a Merrill Lynch Global Automotive Conference in Geneva.

Aside from Cerberus and Blackstone, General Motors Corp. could also join the bidding battle. But it does not stop there, other investment groups could also bid to acquire the Chrysler Group. When asked about the talks and the on-site visit at Chrysler, a spokesman for Cerberus in New York declined to remark Monday. "We routinely don't comment on market rumors and speculation," said Peter Duda of Cerberus. Jason Vines, Chrysler's spokesman, also declined to comment Monday.

However, sources said that both Cerberus and Blackstone are considered serious contenders to buy Chrysler. The Chrysler Group is known for its roller coaster ride in the auto industry. The fluctuation in sales and profits is constant. Since the acquisition of the Daimler-Benz AG in 1998, Chrysler has been a constant newsmaker. This is because the company's heat scorches enthusiasts that even could not handle.

According to analysts in the industry, Cerberus and Blackstone are deemed interested in hiring former Chrysler executive Wolfgang Bernhard to assist in a turnaround of Chrysler. It could be recalled that Chrysler has reported a loss amounting to $1.5 billion in the previous year.

Bernhard was previously employed by Chrysler as a former chief operating officer. Now, he has been targeted by Cerberus and Blackstone as a possible executive or high-level consultant. This information was divulged by the people close to the deal. The assumption about Bernhard's automotive future has been triggered since his resignation in January as head of the Volkswagen brand.

Cerberus, according to experts, has become an increasingly aggressive player in the auto sector. The ace of Cerberus is former Ford Motor Co. executive David Thursfield, who spearheading the firm's auto investment activities. In 2006, the firm agreed to purchase a 51 percent stake in GM's highly profitable finance business.

Blackstone is also another great contender. In 2003, the firm acquired the automotive operations of TRW Inc. for $4.7 billion and later took the company public. Blackstone is the owner of a 56 percent stake in Livonia-based TRW Automotive Holdings. The latter is the largest manufacturer of auto-safety equipment. Blackstone's ace is its chairman - Stephen Schwarzman, who was crowned the "new King of Wall Street" in the latest issue of Fortune magazine.

Daimler has engaged investment banker J.P. Morgan Chase to handle potential deals.

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