Cerberus: Expanding Its Auto Base
March 29, 2007

If you work in the auto industry, Cerberus Capital Management may well be your next employer.

The private equity firm is becoming a household name in the auto industry, especially in Detroit, as it expands its automotive base and shows interest in even more holdings.

On Wednesday, after the stock market closed, it was announced that Cerberus had agreed to buy bankrupt auto supplier Tower Automotive Inc., in a deal valued at about $1 billion.

Cerberus is said to be a front-runner to purchase Chrysler. It is part of a group planning an investment of up to $3.4 billion for bankrupt Delphi Corp. Cerberus led a consortium of investors to buy 51 percent of General Motors Acceptance Corp., a deal worth $14 billion in cash over three years to General Motors. And Cerberus purchased the flooring and acoustics business of Collins & Aikman, another bankrupt automotive supplier being dissolved.

Not only is Cerberus adding to its holding, its adding high-powered automotive talent to its roster. Cerberus just signed Wolfgang Bernhard, formerly of Chrysler and Volkswagen, on as an advisor, likely to provide guidance in a potential Chrysler purchase. Cerberus also signed on former Ford executive Robert Rewey. They join former Ford executive David Thursfield, who heads Cerberus’ automotive unit.

High Horsepower talent

The addition of Bernhard and Rewey is seen as a way to gain a leg up on other competitors considering the purchase of Chrysler, primarily the Blackstone equity group. No one knows Chrysler better than Bernhard, who helped turn it around five years ago as its COO when now DaimlerChrysler CEO Dieter Zetsche was Chrysler’s CEO.

The victim of political wrangling, Bernhard left DaimlerChrysler to head Volkswagen Division, a post he also lost in a political battle. Rewey, meantime, is a 38-year veteran of Ford, who retired in 2001 as head of global sales and marketing.

Founded in 1992 and based in New York City, Cerberus already had a host of horsepower. The large privately owned hedge fund is run by financier Steve Feinberg. Former Secretary of the Treasury John Snow was appointed its chairman last October. Former Vice President Dan Quayle runs one of its international units and has been a prominent spokesperson for the firm. It invests primarily in companies near bankruptcy.

The Tower Deal

The deal with Novi, Mich.,-based Tower will allow the supplier to pay off most of its debt and emerge from two years of bankruptcy court supervision.

Tower is one of Ford Motor Co.'s largest suppliers of truck frames. The company sought court protection in February 2005 after accumulating debt during a 10-year expansion that increased sales to $3.1 billion, 40 times what they were in 1995. The Cerberus offer is subject to bankruptcy court approval.

No word if the deal includes keeping Kathleen Ligocki, a former top Ford executive, as the company’s CEO.

Delphi Update

Cerberus, which has proposed an investment with Appaloosa Management LP for Delphi, had said it would ditch its plan for buying a majority stake in the bankrupt supplier if it couldn’t get a favorable agreement with the United Auto Workers (UAW).

On Monday, the UAW rejected the latest wage-cutting proposal from Delphi and its investors. A union spokesman said the offer was “far short” of anything the leadership would take to its membership. The union spokesperson said Delphi will either come back with a new contract or choose to go to the bankruptcy court in New York to have the contract annulled. If Delphi voids the contracts, the UAW will strike.

Word is negotiations are continuing through April 1, and Cerberus has not said anything about its next move.

Posted by Michelle Krebs at 5:11 AM under Chrysler , Companies , Ford , News , Personalities | Comments (0) | digg this | Seed Newsvine