The Private Equity Council has what might seem to be a very tough job: persuading
lawmakers that private equity principals shouldn’t pay income tax on their income.
In reality, however, the job is easier than that – all they need to do
is donate enormous sums of money to both political parties, and then come up
with a fig-leaf talking point or two that the politicians can use to justify
their pusillanimity. Foremost among these talking points is that private equity,
far from following the strip-and-flip playbook, actually creates
Well, it’s lucky that the idea of taxing private equity principals seems to
have fallen into abeyance at this point, because Cerberus has just announced
or so job cuts, on top of the 13,000 layoffs it announced in February. Worse,
it’s done so while maxmizing corporatespeak:
"We have to move now to adjust the way our company looks and acts to
reflect a smaller market," said Chrysler President Tom LaSorda on Thursday.
"That means a cost base that is right-sized and an appropriate level
of plant utilization."
A cost base that is right-sized? Does LaSorda seriously believe that
talking like this will get him any brownie points with his employees or the
general public? (His shareholders don’t care in the slightest about what he
says, only about what he achieves.)
If Stephen Feinberg makes hundreds of millions of dollars on this Chrysler
deal as a result of
slashing jobs right-sizing his cost base,
it’s going to be very hard for him to make the case that he’s contributing so
much to the greater good that he shouldn’t have to pay much in the way of tax
on his profits. Still, I’m sure that his buddies at the Private Equity Council
will do their best to try.