DEALTALK-Cerberus faces unwelcome scrutiny in autos struggle

By Megan Davies and Poornima Gupta

NEW YORK/DETROIT, Nov 20 (Reuters) - The woes of the American auto industry have put secretive private equity firm Cerberus Capital Management and co-founder Stephen Feinberg in the one place they don't want to be -- the spotlight.

The $27 billion private equity company, named after the multiheaded dog that guards the gates of the underworld, abhors publicity, but its struggling Chrysler LLC unit has been ardently courting the public as it tries to save itself.

Chrysler, along with rival automakers Ford Motor Co (F.N) and General Motors Corp (GM.N), have gone to Washington cap-in-hand to plead for cash to rescue Detroit.

This has placed the firm and Feinberg -- who has shunned cameras and rarely given interviews -- in the uncomfortable position of asking for public money to save a private enterprise.

Cerberus was co-founded by Feinberg and Bill Richter, now senior managing director at the firm.

Feinberg -- a frequent contributor to Republican coffers -- seems content to let fellow executives John Snow, a former treasury secretary in the current Bush administration, and Dan Quayle, who was vice president under former president George H. W. Bush, be the famous names at his company.

Snow's title is chairman of Cerberus Capital Management. Quayle is chairman of Cerberus Global Investments.

It has been Snow who has been the public face of the Chrysler deal. Snow talked in a press release at the time of the deal about the "inherent strength of U.S. manufacturing and of the U.S. auto industry" -- a judgment called into question by the current economic crisis.

BAILOUT DEBATE

If Cerberus makes any money for itself out of any bailout, or if losses from its $7.4 billion investment are covered, there would likely be an outcry.

Trying to allay such concerns, Chrysler said Cerberus has promised that any government assistance would be used only to assist Chrysler -- and not flow through to Cerberus.

Chrysler boss Bob Nardelli, in testimony to a Senate committee on Tuesday, said Cerberus "has made it clear that it will forgo any benefit from the upside that would, in part, be created from any government assistance that Chrysler LLC may obtain."

Nardelli was previously CEO at Home Depot Inc (HD.N), where he resigned in early 2007 after a year of heavy criticism of the company's underperformance and his pay package.

"I think Cerberus is very conscious of the fact that they're going to have to come up with some deal with the government if Chrysler is to be included," said Joel Greenberg, a partner at law firm Kaye Scholer who specializes in mergers and acquisitions. "Somehow they'll have to convince the government that the bailout ... isn't going to flow immediately into Cerberus' pockets."

SECRETIVE FIRM