RoswellGrey

Associated Press, 7-11-07
TOM KRISHER
ASSOCIATED PRESS
ROCHESTER, Mich. — The chairman of the private-equity firm that is buying Chrysler said Wednesday it will fix and hold the troubled automaker and has no plans to sell it off.
Former Treasury Secretary John Snow, who is chairman of Cerberus Capital Management LP, said the U.S. auto industry is poised for a turnaround.
“We want to be there to help the turn and benefit our investors from the turn,” he told the Detroit Economic Club.
Snow said Cerberus likes Chrysler CEO Tom LaSorda's recovery plan and taking the company private will give LaSorda time to implement it. The plan calls for a return to profitability by 2009.
Cerberus has 150 corporate managers who advise the companies it acquires, including former Volkswagen AG and Chrysler executive Wolfgang Bernhard, who is assigned to Chrysler. But Snow insisted that Bernhard is not running the company.
“They're running the place. They're accountable,” he said of LaSorda's team.
DaimlerChrysler AG — the maker of Mercedes luxury cars — agreed in May to transfer an 80.1 percent stake in its U.S.-based Chrysler unit to New York-based Cerberus.
As part of the deal, Cerberus agreed to invest $6.1 billion in Chrysler and its financing arm and to pay DaimlerChrysler $1.4 billion.
DaimlerChrysler would remain liable for certain expenses that could result in it paying Cerberus as much as $1.5 billion to complete the transaction.
Cerberus, however, has agreed to take on $19 billion of the auto company's long-term retiree health-care costs.
Snow said he expected the deal for Chrysler would close in the current quarter, and that Cerberus has no plans to take Chrysler public again.
On another topic, Snow criticized new fuel economy regulations passed by the U.S. Senate, calling them unattainable under present technology and focused too narrowly on the auto industry as a solution to foreign oil dependence and carbon emissions.
The Senate last month approved legislation requiring the auto industry to meet a combined fuel efficiency standard of 35 miles per gallon for passenger cars and light trucks by 2020. The auto industry vigorously opposed the plan, saying it would cripple manufacturers and force them to pare back their fleet of large vehicles sought by consumers.
In the House, Rep. Edward Markey, D-Mass., is working to advance a bill that would force automakers to meet the 35 mpg target by 2018, two years earlier than the Senate version.
The auto industry supports a separate proposal that would increase the standards to at least 32 mpg — or up to 35 mpg — by 2022.
Snow said depending on the final version, the standards might force Cerberus to raise more capital to fund Chrysler's turnaround. It also could raise the cost of producing vehicles, he said.
The Chrysler purchase would expand Cerberus' automotive holdings, which include a 51 percent stake in GMAC Financial Services. It also owns Guilford Mills, the largest automotive seating supplier in the U.S., and Peguform Group, a German-based manufacturer of interior and exterior plastic parts used in autos.
On Wednesday, a federal bankruptcy judge approved the $1 billion sale of auto parts supplier Tower Automotive to Cerberus.