The myth that removing the company from what some now regard as the shackles of quarterly statements will make all the difference is just one of the ironies in this deal. Cerberus, like the other members of this secretive club of private funds, is known neither for its patience nor its altruism. When you move from the cold of the storm into the mouth of the whale it may seem warm and quiet. But it’s only a short-term feeling.
You’re still in the mouth of the whale.
Finlay ON Governance, May 16, 2007
The U.S. Congress has a history of failing to ask the right questions and suffering a severe bout of buyer’s remorse afterwards. It happened with the TARP. It happened over Iraq. And, if things don’t change dramatically, it will happen again with the bailout of the Detroit Three. Our focus for the moment is on Chrysler, in particular.
If Daimler were the parent of Chrysler, as it was up until last year, there would be questions as to what the financial status of that organization was and how much it was putting into rescuing its own investment. Much information would be available to law makers because Daimler is a publicly traded company and there is a degree of transparency to its operations.
But Chrysler is owned by Cerberus Capital Management, which is a private equity entity. It does not trade its shares, or Chrysler’s, on the stock market, and it is rather secretive about its whole operation. Little is known about how big it is, who its investors are, or what it does with its money. Its founder, Stephen A. Feinberg, appears to prefer the opaque to the transparent and the invisible to the well-documented. He doesn’t even like to have his picture taken, and, in one of his rare interviews, he would not permit The New York Times to show his photo.
This is what is behind Chrysler. And it raises a lot of questions.
When Cerberus took Chrysler private, a move which we lamented here, it claimed it could do much more for the company because it did not face the requirements of regular disclosure about its performance. It didn’t want anything to do with shareholders. As a top official of the Cerberus/Chrysler group boasted at the time of the going private deal:
We’ll be able to run it the way we want to run it and not worry about quarterly numbers or what somebody might think on the outside.
Apparently, the exercise turned out to be not exactly as advertised. And the company that neither cared for public shareholders nor concerned itself with what outsiders thought now seeks the sympathetic embrace of taxpayers.
Congress should dig a little deeper to find out more about Cerberus. How much is it making from Chrysler? What new money did it put into the automaker to deal with its so-called cash emergency? Could it have done more? Or has it come to some decisions about the future of Chrysler that Congress might not like to hear and is only looking to direct the taxpayer funds it receives into its own large pockets?
Many Americans are beginning to have serous doubts about how well Congress does in the bargaining sessions that produce its legislation. Too often, it has wound up saying “that’s not what we agreed to.” Before it risks more taxpayer money and its own reputation on its most recent rescue file, it needs to look at Cerberus’ books and call in Mr. Feinberg for a very public chat.
Bailouts are bad enough. Hoodwinks are intolerable.