Cerberus Capital Management, which bought 80% of Chrysler Corporation from Daimler in 2007, while in talks to buy the remaining 20% it does not yet own, experienced the eye popping collapse of the American automobile manufacturers’ comeuppance.
Cerberus didn’t buy its position in Chrysler on a lark. It had teams of financial, operations and legal resources scouring Chrysler in a supposedly extensive pre purchase due diligence exercise.
In an attempt to force Daimler to absorb the shock of this bad news, Cerberus is suing Daimler claiming that Daimler made material misrepresentations and that, had Cerberus known the truth, it would not have closed the deal.
Daimler’s public position is that the books and resources of Chrysler and Daimler were open to Cerberus representatives during their due diligence opportunity, and everything was available for any in depth examination. Everyone knows that pre purchase due diligence isn’t just some politically correct perusal of certified financial statements. Every document relevant to the matter is/should be demanded and examined by people knowledgeable in the subjects, and everyone in a position to know about any issue is available to be interviewed. This includes information within and without the companies. It is unlikely that the due diligence here was a garden party kind of event. Cerberus didn’t hire Cousin Seymour the book keeper to do the due diligence. Has Cerberus notified the due diligence people to inform their E&O carriers of a potential E&O claim? How circular will the finger pointing become? What a great sequel to “Days Of Our Lives”!
Does this qualify as a crisis? HAHAHAHA! You bet your sweet bippy it does. What is the likelihood that this is just the arrival of the ultimate reckoning of every US auto manufacturer’s refusal to deal with the realities of the industry, and nothing more than that? While every auto manufacturer is having a less than stellar year, why is it that only GM, Ford and Chrysler are in collapse?
History repeats. Every obese, arrogant force eventually is consumed by opposing forces. The lean always consume the fat. In Pharaoh’s dream the seven fat ears were consumed by the seven lean ears. Rome fell to the “barbarian” hordes (Just who were the real barbarians is still in debate.). I am old enough to remember when GM, Ford and Chrysler stood astride the auto manufacturing industry like rulers by divine right. What worried GM most in the early 60s was that the Antitrust Division of the Justice Department might try to bust up GM to deter monopolistic practices. That was never politically permissible. So now the market’s own equilibrating forces, acting through the Asian and European auto manufacturers, are giving the American oligopolists their comeuppance. Nothing attracts competition like profitability, and nothing reduces profitability like competition. Either you adjust to the burgeoning competitive environment or it eats you alive. GM, Ford and Chrysler never made that adjustment. The decision not to do so was deliberate, as are all arrogant decisions. The chickens have come home to roost.
How difficult is it likely to be that the dire circumstances of Chrysler can be laid at the feet of Daimler misrepresentations? On the other hand, maybe there are things “in the files” that Daimler doesn’t wish ever to see the light of day. Tune in for tomorrow’s episode of “Days Of Our Lives”.