Chrysler Follows the Strip-and-Flip Playbook

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

another 10,000

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.

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