US lawmakers ask majority owner Cerberus to help rescue Chrysler

15 December 2008

Of the Big Three of American auto, Chrysler's case is somewhat different from General Motors and Ford in that it is privately owned. If private-equity owner Cerberus won't bail out the beleaguered automaker, why should the government? - this question is at the centre of discussions on the administrative bailout being debated by US legislators.

Over the recent past, Washington lawmakers have lashed out at Chrysler's majority owner, Cerberus Capital Management LP, for not explaining why it can' infuse more of its own cash into Chrysler, rather than take federal assistance. Republican Senator Chuck Grassley from Iowa said he would oppose a Chrysler rescue until Cerberus could explain why it couldn't provide the $8 billion necessary to keep Chrysler afloat.

"Congress should demand an accounting of Cerberus' assets and why those assets cannot be used to bail out Chrysler," wrote Senator Grassley in a letter sent to congressional leaders. "If Congress does award taxpayer funds to Chrysler, it must ensure that Cerberus and its other investors are not able to access those funds."

The pressure from Washington lawmakers has put Cerberus in an uncomfortable spotlight. The New York firm, started in 1992, came into prominence as a distressed-bond investor but expanded into a buyer of entire companies. Once it struck deals to buy GMAC in 2006 and Chrysler a year later, the firm has raised its public profile ever so slightly by hiring former US treasury secretary John Snow and former vice president Dan Quayle.

At the time, executives said one of the benefits of being privately held is that Chrysler does not have to make its finances public. Publicly traded companies, such as General Motors and Ford., must regularly file financial information with federal regulators.

GM and Chrysler warned Congress that their companies are in danger of reaching minimum levels of cash needed to sustain operations. Chrysler is seeking a $7-billion bridge loan while GM is seeking a $12-billion loan and a $6-billion line of credit.