Chrysler buyer is a local force

Cerberus owns part of Albertsons, among other Florida acquisitions.

Published May 15, 2007

It's the first time a private investment group bought one of the world's biggest automakers, so the new owner of Chrysler Group is not exactly a household word.

But this hedge fund's far-flung interests - led in part by the likes of former Treasury Secretary John Snow and former Vice President Dan Quayle - have made it a familiar, if unusual, force in Tampa Bay and Florida business circles.

Named after a mythical three-headed dog that guards the gates to Hades, Cerberus Capital Management LP has owned a sizable stake in Walter Industries Inc. in Tampa, moved National/Alamo Rental Car headquarters out of Fort Lauderdale to Oklahoma and has an interest in an 1, 100-acre mixed-use project in Connerton in Pasco County.

The most serious private equity bidder for the struggling Albertsons Inc. in 2006, Cerberus ended up settling for six of the grocer's divisions, including Florida. The purchase price was only the value of the real estate, so Cerberus stands to churn big profits if it can pull off a turnaround.

Tampa is also home to one of the hedge fund's bigger blunders. Cerberus bought Anchor Glass Inc. out of bankruptcy in 2002 only to watch it stumble back into Chapter 11 in 2005, just two years after Cerberus set it free in a public offering.

The brains behind it all is reclusive billionaire Stephen Feinberg, the 47-year-old son of working-class parents in Spring Valley, N.Y. Before Wall Street, he jumped out of airplanes with the 82nd Airborne and wrote papers his senior year at Princeton advocating legalization of drugs and prostitution, according to a profile in Business Week.

Today he's a big contributor to Republican candidates, counts former Secretary of Defense Donald Rumsfeld as a fund investor and relies on Dan Quayle, vice president under President George Bush in the late 1980s and early '90s, as one of Cerberus' international dealmakers.

Cerberus follows a different path than the hedge fund herd. Rivals try to buy out-of-favor, publicly traded companies with cheap capital, fix them up, then flip them to shareholders in public offerings. Staffed with dozens of former CEOs, Cerberus crafted a portfolio more like an operating conglomerate.

Feinberg recently signed up as chairman John W. Snow, President Bush's former treasury secretary and one-time chief executive of Jacksonville-based CSX Corp. Snow joined Wolfgang Bernhard, former chief operating officer of Chrysler, and David Thursfield, who once ran Ford Motor Co.'s operations outside the Western Hemisphere.

Before winning controlling interest in Chrysler from Daimler Chrysler, Cerberus already had deals for GMAC Finance - part of General Motors - and auto parts makers Delphi Corp., Tower Automotive and GDC Automotive; car upholstery specialist Guilford Mills; and Peguform, a German maker of plastics used in car exterior and interiors.

Automakers also use big rental car fleets such as National/Alamo to balance production with supply and demand, a plus for Cerberus in its planned Chrysler turnaround.

"Chrysler has a one in five chance of being around 10 years from now, which is a lot better chance than it had yesterday, " said Peter Morici, a University of Maryland business professor.

Cerberus' broader holdings range from airlines like Air Canada to Formica Corp. and the sports apparel brand Fila. It entered the controversial subprime loan business, which makes higher-risk home mortgages, with the recent acquisition of H&R Block's Option One.

Founded with $10-million in 1992 by Feinberg, a former Drexel Burnham Lambert trader, Cerberus has emerged as one of the most active players in the relentless private equity buying binge. Without Chrysler, Cerberus now owns 50 companies with combined annual revenues of more than $60-billion. The firm's $25-billion in assets have tripled since 2003.

Among them are several Florida hotels; IAP Worldwide, a Cape Canaveral company that maintains 100 military facilities around the world, and Tandem Staffing, a Delray Beach employee-leasing company with an office in Tampa.

Taking on Chrysler, including its $20-billion pension fund and slumping share of the U.S. auto market, is a huge gamble. Experts figure Cerberbus will wield the cost-cutting knife like it did at companies like National/Alamo. In moving the headquarters from Fort Lauderdale to Tulsa, Cerberus cut the senior management team from 25 to five.

Can Cerberus resurrect Chrysler? University of Maryland's Morici is among those willing to give the investment group some leeway.

"They have the management experience, a record of successfully cutting costs and are willing to bet real money you can make cars in North America."

Information from the Associated Press was used in this report. Mark Albright can be reached at albright@sptimes.com or 727 893-8252.

Chrysler acquired

Germany's DaimlerChrysler will give up the second half of its name by selling 80 percent of the U.S.-based Chrysler Group to a private equity fund for $7.4-billion. The new owner, Cerberus Capital Management, inherits an auto giant that is losing money and laying off workers. Daimler paid $36-billion to acquire Chrysler in 1998, when it intended to marry popular brands like Jeep with luxury brands like Mercedes.