Business Insight Zone

Here’s the operative question for Cerberus Capital Management this week [i.e. the second week of August]: “Now that we own it, what do we do with it?” “It,” of course, is Chrysler, which — in case you’ve been traveling deep in the Amazon for the past few months — Cerberus just bought from Daimler. Although it had a few successes along the way, overall the #3 US car maker stagnated under Daimler’s ownership, and the corporate marriage never delivered the synergistic results envisioned by Daimler’s erstwhile CEO, Juergen Schrempp, back in the late 1990s. So now, after what seems like a fairly amicable divorce, the two car makers will go their separate ways. (Daimler has retained a minority stake in Chrysler.)

Mind you, negotiating this divorce wasn’t all fun and games for Cerberus. The investment firm has done plenty of big deals before, including buyouts of auto parts makers and other manufacturing firms. But it had never experienced anything like the limelight it received once it announced the Chrysler deal. This is a key reason that former Treasury secretary John Snow has served as the face of Cerberus during this process; besides his financial and commercial acumen, he’s used to facing the cameras.

Yet Cerberus could predict the media scrutiny. What it couldn’t have known when it announced the Chrysler buyout months ago was that worldwide credit markets would go haywire between that announcement and the consummation of the deal. In the past few weeks, there was even talk that Cerberus might not line up enough funding to pull it off. In the end, though, the deal went through, and questions about financing dropped away when Chrysler made the surprise announcement that ousted Home Depot CEO Bob Nardelli would take the reins. And now comes the hard part: how to make Chrysler relevant again in the automotive world.

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* This article first appeared on the Company of the Day page on 9 August 2007.