NPR logo

'Marketplace' Report: Impact of Private Equity Firms

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
'Marketplace' Report: Impact of Private Equity Firms


'Marketplace' Report: Impact of Private Equity Firms

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript


From NPR News, it's DAY TO DAY. A closer look now at the deal announced today to sell Chrysler. This is a big deal, more than $7 billion, but maybe also a big bargain compared to the $36 billion Daimler-Benz paid for Chrysler nine years ago. This will be the first time that one of Detroit's big three carmakers will not be owned by a major industrial company. The new boss at Chrysler is a private equity firm.

MARKETPLACE's Bob Moon is here. Bob, welcome back. And there's been a lot of talk recently about private equity investment. And now we have this iconic company, Chrysler, being taken out of public hands. What are private equity companies all about exactly, and why are they making these huge takeover deals now?

BOB MOON: Well, Alex, the bottom line here is that there is a massive amount of cash floating around out there. Investment money, literally tens of billions of dollars, this comes from places like big pension funds and wealthy investors, and they're looking for companies to invest in. You can think of these outfits, Cerberus, for example, the firm that's buying Chrysler, or the Blackstone Group or the Carlyle Group, think of them as huge pools of money.

They specialize in going out, finding these troubled companies or maybe just companies that aren't turning as much of a profit as they could be, and they buy these firms from the public shareholders and take them private. That means that they don't have to make a public accounting to shareholders. And they aren't so concerned about what each and every quarterly profit says that can make - that they can take more risks and make more investments in the short term, doing things that would turn a company around.

CHADWICK: I do wonder, if Daimler can't make - I mean, they're a car company. If they can't make money with Chrysler, how will a group of private investors do this? And what's it going to mean for the workers?

MOON: Well, you know, I can understand why that would be a concern of yours. It wasn't too long ago that we had this picture of private equity investors from Hollywood, an image of the corporate raiders who were looking to go in and take over big companies and sell them off in pieces. And nowhere was that more dramatically portrayed than in the movie "Wall Street."

(Soundbite from movie, "Wall Street")

Mr. CHARLIE SHEEN: (As Bud Fox) I thought that you were going to turn Blue star around, not upside down.

Mr. MICHAEL DOUGLAS: (As Gordon Gekko) Well, you're walking around blindly without a cane, pal.

Mr. SHEEN: (As Fox) Why do you need to wreck this company?

Mr. DOUGLAS: (As Gekko) Because it's wreckable, all right?

MOON: Hard to believe that that movie came out 20 years ago, and a lot has changed since then. We don't see as many hostile takeover attempts as there were back then. These day's private equity companies tend to work with the firms that they acquire. In the case of Cerberus buying Chrysler, for example, the investment from right upfront is vowing that its approach is fundamentally long term, and it says, it's prepared to make the investments that support the turnaround plans that Chrysler's current management have.

Now, we've been hearing from Chrysler management before this deal was announced, that those turnaround plans already included big job cuts, but union leaders in this case say they've essentially seen the writing on the wall here and that it's in the best interests of the union members to do this.

CHADWICK: Thank you, Bob Moon, of Public Radio's daily business show, MARKETPLACE. It's produced by American Public Media.

Copyright © 2007 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.



Please keep your community civil. All comments must follow the Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.