Soured Deals Dog Brash Cerberus

Chrysler, GMAC struggles point to problems for private equity giant
By Jim O'Neill,  Newser Staff
Posted Feb 25, 2008 1:15 PM CST
Soured Deals Dog Brash Cerberus
Unsold 2008 Jeep Wranglers sit at a Chrysler/Jeep dealership in the southeast Denver suburb of Centennial, Colo., on Sunday, Feb. 3, 2008. When thousands of U.S. auto dealers gather in San Francisco this weekend, much of the talk will be about just getting through 2008. The obstacles include a shaky...   (Associated Press)

The continued struggles of Chrysler and GMAC—two of Cerberus Capital Management’s largest and most recognized purchases—have observers wondering if the private equity darling has lost its Midas touch, reports Reuters. S&P has downgraded GMAC’s credit rating, Chrysler's January sales slipped 12% even as the company set about cutting models and dealerships in an effort to return to profitability.

Cerberus contends Chrysler and GMAC have good long-term prospects, but the subprime contagion has infected both investments as credit markets tighten and consumers rein in spending. GMAC and mortgage unit Residential Capital lost a combined $6.7 billion in 2007. “GMAC could run into substantial difficulty,” said Cerberus founder Stephen Feinberg. (Read more GMAC stories.)

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