Cerberus stepping up efforts to sell Chrysler

Cerberus stepping up efforts to sell Chrysler
http://www.autonews.com/apps/pbcs.dll/article?AID=/20081016/ANA02/810160272/1142

DETROIT -- Cerberus Capital Management LP is stepping up efforts to sell
Chrysler LLC to General Motors, according to two news reports late today.

GM executives want to get a deal done with Chrysler's owners by the end
of the month, but the parties still are far from having a firm deal in
hand, The Wall Street Journal reported on its Web site tonight.

The Reuters wire service said parts of Chrysler may be broken up between
both Renault SA and GM.

Both reports cited anonymous sources, and no spokespeople for any of the
companies involved had a comment.

The Journal reported that bankers -- including J.P. Morgan Chase & Co.
-- are encouraging a Chrysler-GM deal. J.P. Morgan is the largest holder
of Chrysler debt and also is a major banker for GM, the newspaper reported.

GM has "teams of people" analyzing potential cost cuts, the Journal
said. So far, GM has identified about $10 billion in cost savings from a
merger with Chrysler -- and is interested in getting access to some $11
billion in cash on Chrysler's books, according to the Journal.

Breaking up the company?

A GM-Chrysler combination faces opposition from GM's unions along with
skepticism from industry experts. Some unnamed members of GM's board
also have given such a deal a "cool reception," the Journal said.

But GM's top executives "remain bullish" on the prospects of a combined
company, according to the report.

Cerberus, which owns an 80.1 percent stake in Chrysler, wants to
maintain a stake in the combined GM-Chrysler, the Journal said.

Meanwhile, Reuters reported that Chrysler is considering a wide range of
deals with both Renault and GM that could break up Chrysler, Reuters
reported, citing people familiar with the talks .

Under this scenario, GM may acquire some of Chrysler's assets as an
alternative to an outright purchase of its smaller rival, the sources
told Reuters.

Chrysler assets under consideration for purchase by GM include
Chrysler's minivan line, a market segment Chrysler pioneered almost 25
years ago, and its truck-production facility in Mexico, one of Reuter's
sources said.

The contacts between Cerberus and the automakers remain wide-ranging and
preliminary but have been given urgency by the sharp downturn in auto
sales that has forced Chrysler, GM and Ford Motor Co. to take steps to
cut costs and shore up their cash holdings.

Other deals being considered by Cerberus hinge on whether Chrysler's key
assets now have more value separately than together, the sources told
Reuters.

Selling off Mopar, Chrysler Financial

As a result, Cerberus is looking at selling its Mopar parts unit,
spinning off its engineering operations as a separate company and
separating Chrysler Financial, one of the sources said.

The captive finance company could also be merged with GMAC, the
GM-affiliated lender in which Cerberus owns a controlling 51 percent
stake, several sources told Reuters.

In addition, Cerberus has had talks with GM about acquiring the
automaker's remaining 49 percent share of GMAC and that remains a
possibility, those sources said.

But all of the potential deals have been complicated and slowed by the
volatility in financial markets and frozen credit markets, according to
the people familiar with the talks who were not authorized to speak
about the discussions.

Market turmoil has made it far more difficult for Cerberus and potential
bidders to agree on the value of Chrysler's various parts and GMAC, the
sources said.

Cerberus bought its controlling stake in Chrysler from Daimler AG in
2007 for $7.4 billion, but the automaker, like its listed Detroit
rivals, has been hit hard by a steep decline in U.S. auto sales to
15-year lows.

The still-ongoing talks between GM and Chrysler have revived discussions
about a potential merger that started in early 2007 before Chrysler was
sold to Cerberus.