Help from Cerberus unlikely Chrysler Chief Executive Officer Bob Nardelli on Friday indicated to Congress that he had asked the automaker's majority owner for more money but was turned down.
The revelation came during the second day of hearings over the Detroit Three's request for $34 billion in federal loans to survive the economic downturn.
Lawmakers increasingly questioned Nardelli about why the privately held company should receive the $7 billion in government assistance it is seeking. General Motors Corp. and Ford Motor Co. are seeking $18 billion and $9 billion, respectively. Chrysler LLC's majority owner, Cerberus Capital Management, acquired 80.1% of Chrysler in August 2007 with a $7.4-billion investment.
"If the private equity company that currently has the major holding in Chrysler has $24 billion currently in assets and they will not put forth any more money to stave off bankruptcy, how can we, in all good conscience, expect the taxpayers to take on this substantial cost?" U.S. Rep. Ginny Brown-Waite, R-Fla., asked Nardelli during the House hearing Friday. Similar remarks were made in a Senate hearing on Thursday.
Chrysler seems to be preparing for the worst. Chrysler has hired a prominent law firm, called Jones Day, as bankruptcy counsel to help the automaker prepare for a possible Chapter 11 bankruptcy filing should its efforts to persuade Congress for help fail, according to the Wall Street Journal. A Cerberus spokesman declined comment for this report.
Chrysler said it hired the firm to help evaluate whether there were better options than getting a bridge loan from the government, which it has maintained is the best option.
Nardelli has said Chrysler could go straight into liquidation if it fails to win the $7 billion it needs to stay afloat.
Chrysler also is asking for as much as $8.5 billion in loans from the U.S. Energy Department to help build more fuel efficient vehicles. On Friday, Nardelli also said Chrysler's financial arm needs about $4 billion to $5 billion so it can make loans.
On Friday, under intense questioning about why Cerberus is not injecting its own funds into Chrysler, Nardelli responded that Cerberus is made up of many investors, such as pension and other funds, and he cautioned that Cerberus is unable "to commit, on the behalf of those investors, to put more" money into Chrysler. Nardelli said he has asked Cerberus for more money.
"We've asked them," he said. "We've asked every major financial institution. All hundred of those that got TARP (Troubled Asset Relief Program) funding, we've asked for funding. We've gone offshore asking for funding." Detroit Free Press
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