Time For Cerberus To Testify

The Big 3 automotive CEOs are currently testifying on Capitol Hill, alongside UAW president Ron Gettelfinger. Later this afternoon, the Congress will listen to a panel of academics and U.S. Comptroller General Gene Dodaro.

It’s a good witness list, but one name is glaringly absent: Stephen Feinberg, CEO of Cerberus Capital Management. Or if the spotlight is a bit too bright for the reclusive Feinberg, at least Cerberus chairman John Snow — a former Treasury Secretary who’s used to these sorts of things.

Representative after representative have asked Chrysler CEO Bob Nardelli why U.S. taxpayers should inject capital into his company, when its majority equity owner has declined to do so. Nardelli has replied that Cerberus has: (a) Allowed Chrysler to draw down $2 billion in equity, (b) Convert its second-lien debt into equity, and (c) Offered to give up any carried interest on its investment. What he has been unable to do, however, is answer how much dry powder Cerberus has under management, how much it’s allowed to invest in a single company or anything else about the private equity firm’s status or strategy.

I’m always a bit amused to hear elected officials characterize private equity firms as Scrooge, as if public shareholders are Robin Hood. Nonetheless, it is incumbent on Cerberus to explain its Chrysler strategy. Nardelli cannot answer why Cerberus will or won’t provide additional capital — any more than I can answer why Thomson Reuters won’t raise my salary. I could just chalk it up to penny-pinching, but can’t say anything definitively without seeing high-level balance sheets or strategy plans (which I don’t have access to for Thomson Reuters, and which Nardelli doesn’t have access to for Chrysler).

Barney Frank should ask Cerberus to testify, and Cerberus should accept. Otherwise, the Chrysler debate is less productive than doing donuts in an empty parking lot.