Why Can’t Cerberus Foot the Bill?

When General Motors and Chrysler asked Washington for more money last week they took very different approaches. In exchange for an extra $17 billion from taxpayers — on top of the $13 billion it had gotten since December — G.M. said it would reduce costs by shuttering plants, cutting brands and slashing 47,000 jobs, about a fifth of its remaining work force.

For its $5.3 billion — on top of the $4.3 billion it has received since December — Chrysler offered little more than an assurance that it has already cut costs and accomplished most of what it had to do to become a valuable, viable company. It offered to trim production by a paltry 100,000 units — leaving it with capacity to make almost one million vehicles more than it will sell this year — on the questionable assumption that demand, and its market share, will bounce back next year.

Chrysler said the only reason it was back asking for more money so soon was that the car market was worse than it had expected two months ago.

This cavalier approach to the public purse raises a very big question. If Chrysler is really on track for a turnaround and all it needs is some financing to get over a bad patch in sales and debt markets, why doesn’t Cerberus Capital Management, which owns 80 percent of the company, put up the money itself? Why should taxpayers have to take the risk? That’s what private equity funds like Cerberus are supposed to do.

Cerberus and Daimler, which retained a stake in Chrysler, have promised to convert $2 billion in loans to Chrysler into equity, which should help reduce its debt. But Cerberus said giving fresh money would violate its fiduciary duty to investors, breaking company rules limiting how much it can commit to any given investment.

We suspect these rules would be more pliant if Cerberus deemed Chrysler to be a good deal.

It seems the secretive private-equity fund is willing to gamble on Chrysler’s survival with the taxpayer’s dime, but not its own.

Chrysler warns that if it doesn’t get more money from Washington it will have to declare bankruptcy.

Our argument for bailing out Detroit has been based on the notion that the collapse of the American carmakers would devastate an economy already reeling from huge job losses.

The case for saving Chrysler is certainly the weakest. It is the smallest of the Big Three, employing just more than 40,000 hourly workers. As President Obama and his aides consider whether to supply new funds, they should carefully weigh all of the arguments.

We do not minimize the personal suffering of Chrysler’s employees if the company goes under. We urge the White House to carefully analyze how wide the pain would spread. But we are somewhat skeptical about the claim in Chrysler’s brief to the Treasury that allowing it to go into bankruptcy could risk its liquidation, at the cost of hundreds of thousands and perhaps millions of jobs at Chrysler, its dealers and suppliers.

It also said a bankruptcy would cost the government more than this bailout. Given the state of the debt market, it said the government would likely end up providing the bulk of the so-called debtor-in-possession financing — an estimated $24 billion — which allows a company to remain in operation and pay its bills while it gets through an orderly bankruptcy.

Still, there may be other arguments for saying no to Chrysler. It might finally shake G.M., its creditors and the autoworkers’ union out of their complacency, forcing them to reach an agreement to reduce the beleaguered automaker’s liabilities. Saying no might even make Cerberus reconsider and put up some cash of its own.

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