Apr 6, 2009
Cerberus, a “strip-and-flip” private equity company, bought Chrysler in 2007 – and proceeded to run it deep in debt.
Practically the first thing it did was to borrow ten billion dollars from the banks to which it is closely tied – JPMorgan Chase, Goldman Sachs, Citigroup and Morgan Stanley. And, in a highly unusual move, it pledged all of Chrysler’s plants and machinery as collateral.
Cerberus didn’t use that extra money to expand Chrysler or develop it. It didn’t develop new vehicles – as this year’s Detroit auto show proved. It didn’t build new plants. It didn’t work out new technologies. No, it just borrowed the money, which apparently ... evaporated!
It split Chrysler into three separate companies – the auto production company; the finance company; and a real estate company. The auto production company got all the debt. The finance company ended up getting the profits on the sales of the cars, while the auto production company absorbed the losses on leasing cars. And the real estate company got Chrysler’s own headquarters, for which Chrysler must now pay rent!
How much money did the Cerberus partners take out of Chrysler? No one knows, since they don’t even have to pretend to let anyone see their books. But one thing we do know is how much money these sharks made from running all the different companies they bought and sold into the ground. In 2007, managing companies worth a total of 27 billion dollars, Cerberus had revenue of 100 billion dollars – in just one year.
And just a little note: Cerberus’s main guy, Stephen Feinberg, recently spent 15 million dollars – just to renovate his NYC townhouse.
Now, to complete the circle, those same banks aligned with Cerberus are threatening to push Chrysler into a bankruptcy – so they can grab the collateral, that is, the Chrysler plants, and sell them off.
Workers have no interest in giving up more for these thieves. Take back the money from these thieves. Use it to keep the plants open.