‘Failure Is Not An Option' - Cerberus

Anthony Fontanelle
June 15, 2007

The Cerberus Capital Management CEO Stephen Feinberg and his deputies earlier met with a group of Chrysler's largest and most influential dealers for the first time. The meeting is designed to energize the vision of the automaker for a more profitable future.

About 18 members of the Chrysler dealer council were invited to Cerberus' Park Avenue headquarters in Manhattan Thursday for an extensive four-hour discussion with the private equity firm's power players, including Feinberg, Managing Partner Lenard Tessler and Wolfgang Bernhard, the former Chrysler chief operating officer who now works with Cerberus. Chrysler CEO Tom LaSorda also participated in the meeting.

On May 14, Cerberus agreed to acquire Chrysler for $7.4 billion in a deal that is expected to close later this summer. Feinberg, the deal-maker behind the purchase, had an upbeat message. According to John Schenden, the owner of Pro Chrysler Jeep in Denver and a member of the dealer council, Feinberg told the dealers “Failure is not an option.”

The guileless discussion covered an assortment of issues facing Chrysler and its dealers, from the size of the dealer body to the role of Chrysler Financial, the automaker's lending arm. "We talked about the business, we talked about everything," Schenden said. "It was maybe the best meeting I have had in 44 years in this business."

Schenden was particularly impressed with Feinberg, whom he called "one of the most intelligent men I have ever met." He added, “Though he's made his reputation on Wall Street for his competitive streak and financial talent, Feinberg is fiercely patriotic and made it clear that he wants to help bring the American car industry back to prominence. Everything he said made me feel he is doing it for the right reasons," Schenden said. "He drives a domestic vehicle. His people drive domestic vehicles. They are red, white and blue, through and through, and I love it."

Several Chrysler dealers have said that they are pleased that the automaker is back under American ownership. Chuck Fortinberry of Clarkston Chrysler Jeep was so touched that he specially made a painting of a flapping American flag inscribed with the words "Bringing Back the Pride" to hang in his dealership.

Private-equity firm Cerberus promised to bring the dealers back to New York later for a complete update on Chrysler vehicle plans. Chrysler spokeswoman Lori McTavish said that it was a "closed meeting" and could not comment further.

Chrysler's dealers had bumpy relations with the company under the ownership of Germany-based DaimlerChrysler AG. In 2006, the company built too many vehicles and pressured dealers to order excess vehicles. The plight resulted to the resignation of Joe Eberhardt, Chrysler sales and marketing executive, in December. Since then, LaSorda has made repairing dealer relations a top priority.

Cerberus is acquiring 80.1 percent of the ailing American luxury division of DCX in the midst of a restructuring that lost $2 billion in the first quarter of this year on top $680 million last year. When the transaction completes, Chrysler will take on the name Chrysler Holding LLC. Its product lineup includes some solid hits but is considered too truck and SUV heavy given consumers' growing concerns about fuel prices.

Chrysler has autonomously been manufacturing vehicles since 1925. The company and its subsidiaries became part of Daimler after a grueling deal dubbed as ‘Merger of Equals’ with Daimler-Benz in 1998.

At present, the automaker is trying to revive its good image. The effort is bolstered by new products that appeals to the increasing needs of modern drivers. Like the reliable EBC brake rotors, Cerberus wanted to put a halt to sales doldrums and further losses.

Source:  Amazines.com