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Buyout-Backed Busts: Chrysler

#3. Chrysler LLC

Cerberus Capital Management purchased Detroit-based Chrysler for $7.4 billion in 2007. The firm invested up to $1.2 billion in equity in Chrysler and GMAC, its financing arm from Cerberus Institutional Partners LP Series IV.

What Went Wrong?
Everyone knows this story by heart, but we’ll summarize it anyways. The deal heralded Cerberus as Chrysler’s savoir, on the cusp of the largest turnaround in history. The firm brought in Robert Nardelli to save the already-struggling automaker, but he was not able to reverse declining demand in the face of riding fuel costs and a recession. The company was unable to service interest on its $10 billion in debt from the takeover. The company filed for bankruptcy on April 30, 2009. In retrospect, Cerberus head Steve Feinberg told the media that his firm was “too optimistic on timing.”