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Cerberus To UAW: Take Our Company--Please!

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As Tom Cruise ramped up publicity for his warm and fuzzy yuletide Nazi slaughter gift to moviegoers, Cerberus Capital Management--you know, the company named for the three-headed dog from Hell?--was wrapping a very special holiday prezzie of its own for the UAW. Only thing is, no one's sure if it's a gift or a Trojan horse.

Last Friday, news emerged that Cerberus is planning to offer its holdings in Chrysler to the UAW and assorted other stakeholders. In exchange, Cerberus is asking for unspecified concessions from the UAW--concessions that will help make Chrysler more viable in the marketplace and facilitate the recently announced federal bailout package.

So, why would sensible Cerberus give up a company in order to make it more profitable? Well, for one, Cerberus has fingers in many pots, including Chrysler Financial. In the long run, Cerberus stands to make a considerable chunk of change--more than the value of its stake in the company--if Chrysler pulls through. And for two, the manufacturing side of Chrysler is limping along at best. The term "hemorrhaging money" comes to mind.

In other words, by washing its hands of Chrysler's manufacturing side, Cerberus is hedging its bets. If Chrysler pulls through, Cerberus makes money on the financing side. If Chrysler tanks, Cerberus avoids the nasty entanglements and money loss that would ensue. And best of all: if the UAW bites on the offer, Cerberus gets to sit back and watch the union walk a mile in its former shoes--which, honestly, could be the best holiday gift any of us have ever received. -- Richard Read

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