Cerberus Bids for 100 Percent of Chrysler

Maybe a story in this space in June about private-equity firm Cerberus selling its stake in Chrysler — which appeared to be off-base at the time — could turn out right in the long run.

The story at the time was that the prestigious Financial Times had reported that Cerberus had sold most of its stake in Chrysler to investors. Cerberus denied it at the time, but in such vague terms it didn’t put the notion to rest.

Then today, former partners Daimler and Chrysler disclosed that Cerberus has now approached Daimler about acquiring the 19.9 percent of Chrysler that Cerberus doesn’t already own. The companies are ”in discussions.”

So it turns out that Cerberus is seeking to increase its stake in Chrysler, after all. However, that might not be the vote of confidence it appears.

By acquiring all of Chrysler, Cerberus could also be making it easier to sell. Automotive News quoted an analyst who said that’s one possibility, although he stressed it’s too soon to tell.

A group of investors led by New York-based Cerberus paid $7.2 billion for 80.1 percent of the Chrysler Group in August 2007, breaking up what had been DaimlerChrysler. The DaimlerChrysler merger, pairing the Mercedes-Benz parent with Chrysler, took place in 1998.

In November 2006, Cerberus also led a group that bought 51 percent of GM’s captive finance company, then called General Motors Acceptance Corp., for $14 billion, to be paid over three years.

Both investments have turned out to be big losers for Cerberus. Daimler reported that for the second quarter of 2008, its share of Chrysler lost about $547 million before taxes, depending on the exchange rate.

Daimler said its results are not comparable to whatever results Cerberus may have experienced, due to differences in accounting rules.