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By Jessica Hall
PHILADELPHIA Oct 13 Cerberus Capital
Management, which owns 80 percent of Chrysler, has no plans to
divest its stake in Chrysler and aims to own an interest in any
combined company that may result from a merger with the U.S.
automaker, a source familiar with Cerberus' thinking said on
Cerberus had held talks about potentially combining
Chrysler with General Motors Corp (GM.N), but never discussed
divesting its entire Chrysler stake or swapping Chrysler in
exchange for an increased stake in auto-financing business
GMAC, the source said.
"Cerberus is not dumping Chrysler or simply swapping it for
an increased share in GMAC. That deal was not discussed and
they have no interest in it," said the source, who declined to
be identified because the source was not authorized to speak
with the media.
"In any business combination with GM or anyone else,
Cerberus would look to come out on the other side owning a
meaningful stake in the combined auto company," the source
Cerberus has no plans to exit the auto industry, despite a
25 percent drop in Chrysler's sales this year, the source
"For the right deal, Cerberus would invest more money," the
source said. "This is a long-term investment with a lot of
Cerberus bought an 80 percent stake in the automaker in
August 2007 from Daimler AG (DAIGn.DE), but the U.S. auto
market has seen demand plunge since then because of a
combination of high gasoline prices, tight credit and a weak
"Cerberus executives have maintained repeatedly that they
believe in the industry. They expect to be there for the long
term and want to do all they can to position Chrysler for the
future," the source said.
Chrysler, whose sales have fallen 25 percent this year, has
faced scrutiny over whether it can ride out a steep downturn in
U.S. auto sales that many analysts expect to stretch through
Chrysler Chief Executive Bob Nardelli said on Monday the
automaker is talking with "third parties," but declined to
comment specifically on whether the firm held talks with GM.
Cerberus has talked with several companies, including Ford
Motor Co (F.N), Renault-Nissan (RENA.PA) (7201.T), Italy's Fiat
FIA.MI, India's Tata Motors Ltd (TAMO.BO) and Canada's Magna
International MGa.TO, other sources previously told Reuters.
"Industry members are exploring every combination you can
think of. In the ones that make sense, the synergies are huge,
and much of it gets realized immediately," the source familiar
with Cerberus said.
Daimler has said it is in talks to sell its 20 percent
stake in Chrysler to Cerberus. Owning all of Chrysler would
make any merger negotiations simpler for Cerberus to pursue,
the source said.
The timing of a resolution with Daimler or any full merger
for Chrysler was not immediately clear.
Cerberus, named for the mythological three-headed dog that
guarded the gates of the underworld, declined to comment.
The firm, which has about $26 billion under management, has
gotten much media attention for its investments in Chrysler and
GMAC at a time when the U.S. auto and housing industries have
been hit by the credit crisis.
"While we have received a lot of press about certain
companies and their problems, not only will these companies not
have a significant effect on our performance, but they all, in
our view, are conservatively valued, and some may have real
upside from the mark," Cerberus head Stephen Feinberg said in a
recent letter to investors.
"The Fund remains well diversified such that no one, two or
three positions will determine our returns," Feinberg said.
"None of our problem positions are large enough to create a
real return problem for the Fund."
(Reporting by Jessica Hall; Editing by Susan Kelly, Gary
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