Cerberus/Chrysler Situation Analysis
Cerberus Capital Management, L.P. is one of the world's leading private investment firms. It specializes in providing both financial resources and operational expertise to help transform undervalued companies into industry leaders for long-term success and value creation. The company is headquartered in New York City with partner and/or advisory offices within United States and around the world. With its minority interests in companies around the world the company generates over $60 billion in annual revenues. On May 14, 2007 DaimlerChrysler sold 80.1% stake of its Chrysler Group to Cerberus Capital Management, while Daimler retained 19.9%. Cerberus invested $7.4 billion in a new venture which will be called Chrysler Holding LLC. Daimler will not get any money; in fact it will pay $650 million to cover Chrysler’s outstanding debt and restructuring changes. Chrysler LLC will assume all retiree obligations, including its overfunded pension plan and 19 billion in retirement liabilities. With the acquisition of Chrysler Cerberus has issues to resolve such as healthcare and retirement liabilities and opportunities that will lead the organization toward success.
Cerberus purchased Chrysler knowing that it had a huge debt to pay off on retiree health care benefits. The elimination of these liabilities can have a significant impact on the future of the company. The debt has been accumulated due to the fact that too little money has been set aside to pay pensions and retiree health benefits. The taxpayer should not have to pick up the burden. The government has guaranteed to take care of pensions that have not been taken care of by organizations through the Pension Benefit Guaranty Corp. If the government loans the money to Chrysler, it will have to pay back with interest accumulated. To avoid its dept Chrysler can not file bankruptcy; consumers will not buy cars from a bankrupt manufacturer. A solution for Chrysler is to turn to...
Please join StudyMode to read the full document