Cerberus Under Fire On Capitol Hill

Dec 11 2008 | 4:42am ET

While a $15 billion bailout of the U.S. auto industry appears near, that doesn’t mean that Cerberus Capital Management has won any fans on Capitol Hill.

The private equity giant, which bought Chrysler last year, has been the target of some vitriol from lawmakers who ask why the taxpayer should bail out Chrysler when Cerberus, which manages $27 billion, won’t. And they aren’t buying the line Cerberus is selling.

“Cerberus has indeed ‘stepped up to the plate’ to support the American auto industry, and Chrysler in particular,” the automaker said in a statement recently.

“Cerberus has cash—lots of cash—that it is unwilling to put into this company,” Sen. Bob Corker (R-Tenn.) said at last week’s hearing, featuring Cerberus-appointed Chrysler CEO Robert Nardelli.

One of Corker’s colleagues, Sen. Charles Grassley (R-Iowa), is calling on Cerberus to explain why it can’t provide the $8 billion Chrysler requires.

“Congress should demand an accounting of Cerberus’ assets and why those assets cannot be used to bail out Chrysler,” Grassley wrote in a letter 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.”

And the criticism is bipartisan. Rep. Steve Kagen (D-Wisc.) told The Wall Street Journal that he is “dead set against” the bailout, because a Cerberus portfolio company closed two paper mills in his state.

Cerberus, which along with co-investors including Citigroup, Third Point and Sun Capital Partners has lent the automaker $2 billion, says Chrysler is being unfairly singled out.

“Chrysler’s shareholders are no different than the shareholders of General Motors and Ford,” the p.e. firm said.


In Depth

Exotic Assets: Investing In Rare Violins

Jan 17 2017 | 4:43pm ET

By definition, alternative investments include exotic assets far beyond your typical...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

The Trump Administration: What It Could Mean for Carried Interest

Jan 19 2017 | 5:25pm ET

The arrival of the Trump administration brings the potential for a repeal of the...

 

From the current issue of

As initial anxiety over Donald Trump’s victory gave way to market euphoria in the days following the election, there was a casualty. Gold prices.