Hammerman Capital Management

Daimler’s purchase of Chrysler in 1998 didn’t work as well as expected and the German automaker sold 80% of Chrysler in 2007 to Cerberus Capital, an American private equity group. Cerberus Chairman John W. Snow envisioned returning the USA’s third largest car manufacturer to its former glory. That didn’t happen and by 2009 Chrysler’s survival was dependent on a federal bailout and a partnership with Fiat, the Italian carmaker.

Snow, the former treasury secretary in the George W. Bush Administration, built his optimism on American entrepreneurship and wrapped it in the American flag. In a July 2007 speech prepared for the National Press Club in Washington (and still available on the Cerberus website), Snow said "Cerberus has the opportunity to use the tremendous financial innovation of private investment to turn Chrysler around."

Chrysler Federal Bailouts

But in December 2008 and March 2009, Chrysler requested and received multi-billion dollar bailouts from the U.S. Government. By 2009, it was in negotiations with Fiat to transfer at least part of the company to the Italian firm.

Chrysler’s financial troubles apparently grew faster and larger than Cerberus could handle. But in his National Press Club speech, Snow outlined what he considered some of the basic problems of American business and what he identified as potential new solutions. He recalled that the federal government had to bailout Chrysler 25 years earlier. "Private equity was virtually unheard of at that time," Snow said.

Convert Chrysler into Private Company With Long Term Value

But in 2007, he said, private equity and outside business consultants were capable of turning Chrysler into a private company that could "build longer-term value, to make strategic investments and to focus all of its energies on improving the company’s performance."

While acknowledging that private investment is not a "magic elixir," Snow said it would allow Chrysler management to plan and execute without Wall Street pressure. The automaker would be able to operate"without fear of short term negative market reaction from quarterly public company reports and the pressures to meet analyst targets," he added.

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