Monday, May 14, 2007

Cerberus Ensnares Itself with Chrysler

Cerberus will walk off with Chrysler and that dastardly health and pension liability. DaimlerChrysler (NYSE:DCX) is probably the big winner.

Cerberus has made a reputation for slash and burn. In many of their previous acquisitions the conditions were ripe for this type of manoeuvre. (I.E. the unions and suppliers were weak)

But realistically speaking what will Cerberus do that has not been done before. If the only card they hold is "My knife is the sharpest" they may reduce some short term costs but can they build a car company. In the final analysis they need purchasers with money in their pockets buying the Chrysler nameplate. No one has realistically suggested that Cerberus will improve product design and marketing.

The cost cutting will be brutal and Messers David Thursfield and Wolfgang Berhard seem to have the correct resumes. They are headstrong and good at not caring what others think of their strategies.

The US is heading rapidly into the Presidential election cycle. Democrats seem to be re surging. Sticking it to retirees and current workers will resonate politically. The Chrysler workers are strategically located and can make a big impact.

Cerberus probably has a financial spreadsheet somewhere on what they want to do. Politicians usually can count votes. Cerberus may have purchased a major political problem that they are not very good a dealing with.

Kudos to Daimler for kicking this one out. You can just hear the lock and load over at the auto workers union.