June 2, 2008
It is being reported by the Financial Times, Cerberus has sold more than half its equity in either Chrysler and/or GMAC to a group of investors. It is claimed investors put up $1 billion for stakes in one or both companies. No further details have been provided at this time except Cerberus or Chrysler have not responded to calls.
GM sold 50% of GMAC to Cerberus in 2006 for $14 billion. Last August Daimler sold approximately 80% of Chrysler for $7 billion.
Daimler just announced the company had cut the book value of its Chrysler stake to around $875 million at current exchange rates from roughly $1.8 billion last August. That will value Cerberus' position in Chrysler at about half of what it paid Daimler last year.
In GM's first quarter 2008 financial release, its 50% stake in GMAC lost $1.45 billion. This adds to the losses GMAC incurred last year as the housing collapse in the United States began to unfold.
The US auto market continues to stall as the economy slows and it is expected sales in May were down 10% with sharp declines at GM, Ford and Chrysler. Annual sales rates are at their lowest in over a decade with no rebound in site. The manufacturers report monthly sales tomorrow.
I will not reiterate my extensive thoughts on the future of Chrysler LLC and Cerberus' foray into automotive but if the above report is in fact true, it seems the shake-up is about to begin.
Update: According to Automotive News Cerberus is denying the Financial Times report.
"Cerberus has not sold any equity in Chrysler," said the Chrysler official speaking on condition of anonymity. "There are always co-investors at the time of the transactions so when they originally purchased 80.1 percent of Chrysler, there were co-investors at that time. They still own 80.1 percent."
In any case I will leave the speculation aside until the story unfolds. However, I do suspect that Cerberus may have just received a cash infusion into these two troubled enterprises from new investors diluting their original position if their denial is true.
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