Chrysler tech, Cerberus-style

By BOB GRITZINGER Bad news aside, we haven't heard much from privately held Chrysler since it was acquired by Cerberus Capital Management in 2007. CEO Robert Nardelli seems ready to change that, starting by marshaling the Auburn Hills, Michigan-based automaker's latest technological breakthroughs and putting them into production as soon as possible. Company engineers and designers are working together more than ever through the magic of computer morphing, which is helping to cut as much as 10 months out of the typical 31-month development time for a new vehicle. What's the latest and greatest coming from Chrysler? Here's a peek. -- We're already driving two-mode hybrid-powertrain technology on General Motors sport/utilities, such as the GMC Yukon and the Chevy Tahoe, but Chrysler isn't far behind with its 2009 Dodge Durango and Chrysler Aspen SUVs, using the same system developed in a partnership with GM, Mercedes-Benz and BMW. On sale this fall, the Chrysler SUVs use the same four fixed gears and two electric-vehicle modes as everyone else in the joint hybrid-tranny project, but Chrysler powertrain gurus say its version is more refined. In the Durango and the Aspen, the two-mode system is tied to a 5.7-liter Hemi V8 with variable valve timing, multidisplacement cylinder deactivation and fuel cutoff. Chrysler says the combination is good for a 25 percent bump in overall fuel economy (and a 40 percent jump in city mileage) versus a nonhybrid Durango or Aspen with a 5.7-liter Hemi V8 with cylinder deactivation. -- Chrysler's LX large rear-drive models (Chrysler 300, Dodge Charger) will see a series of chassis and powertrain upgrades for the 2009 model year. On the fuel-saving front, Chrysler will fit all-wheel-drive models with an active transfer case and front-axle disconnect system that promises an immediate 1-mpg improvement in fuel economy. Most of the time, the vehicles will run in rear-wheel drive, but when road or driving conditions dictate, an onboard computer will automatically speed up the front transfer case via an electric motor, reconnect the front drive and send up to 38 percent of power to the front wheels. Chrysler also is rolling out a $595 infra-red-based adaptive-cruise-control option (now on '08 300s, on all LX models in '09). Meanwhile, the 300 and the Charger will get suspension upgrades for 2009, and down the road, the performance 300C SRT8 may get active suspension, with dampers that can be switched between standard and sport modes. -- Big rigs also are getting attention, with the new 2009 Dodge Ram eschewing the traditional leaf-spring rear suspension for a five-link coil-spring setup--the first ever on a conventional pickup. Chrysler says the suspension is 40 pounds lighter and improves ride and handling without compromising towing or hauling capabilities. -- In the "gee whiz" department, Chrysler wants the world to know that the techno cupboard is full of surprises, from back-seat satellite television and in-car connectivity that promises to transform a rolling vehicle into a WiFi hot spot to safety improvements such as blind-spot detectors and a rear cross-path detection system intended to prevent parking-lot mishaps. Although the WiFi isn't a factory option (it is available through Mopar parts for '09, however), '09 Chrysler models will offer enhanced voice-activated entertainment and communications systems and Sirius satellite TV on back-seat screens, including a third-row screen that swivels to allow viewing from reverse-seated minivan passengers. The simple blind-spot-detection system, which provides a telltale warning light in the mirror and an audible alert, arrives on '09 Chrysler minivans. The same sensors in the rear fascia of the vehicle do double duty as detectors of unseen oncoming vehicles up to 66 feet distant as drivers try to back out of blind parking spaces.

Daimler bonus to LaSorda outlined

Total '07 pay worth about $20.7 million

BY TIM HIGGINS • FREE PRESS BUSINESS WRITER • February 28, 2008

Daimler AG paid Tom LaSorda a $15.7-million bonus for the successful sale of Chrysler to Cerberus Capital Management last August, filings with the federal government showed Wednesday.

LaSorda, who had been the top Chrysler executive under then-DaimlerChrysler AG, received in 2007 a total compensation package from Daimler worth about $20.7 million under Wednesday's exchange rate, according to the German company's filing with the U.S. Securities and Exchange Commission.

Cerberus, a private equity firm, acquired majority control of Chrysler on Aug. 4, leaving Daimler with just 19.9% of the Auburn Hills automaker.

The new filings also give a window into how Chrysler did during the first two months following the ownership change: Chrysler lost 1.9 billion euros -- or $2.9 billion under today's exchange rate, according to Daimler's annual report.

Much of that money -- $2.4 billion -- was related to restructuring measures and a new labor agreement with the UAW, which did not necessarily occur in those 8 weeks, the filings indicated.

The picture of how Chrysler did last year, however, is far from clear. There is a three-month reporting lag, the report said.

Chrysler on Wednesday night denied losing $2.9 billion in the two-month span -- saying it was, in fact, profitable in that period -- and said its losses in 2007 were "significantly less than 2.9 billion," according to Chrysler spokesman David Barnas. The automaker believes any differences are because of the difference between U.S. accounting practices and international accounting practices, which Daimler used.

German officials did not answer questions late Wednesday afternoon.

In November, Chrysler's new CEO Bob Nardelli said Chrysler was set to lose $1.6 billion, though he did not explain his accounting methodology.

Chrysler, as a private company, does not make its finances public, and its officials have said the benefit of being a private company is that it can focus on the long term, making decisions for future success.

"Since August and the return of Chrysler as an independent company, we have not only been meeting, but, in many cases exceeding all key metrics," Barnas said in a statement.

"Despite the challenges that lie ahead, Chrysler feels confident today that the company is poised on the threshold of full recovery," he added. "We are making the tough decisions for the long-term health of the company, our employees are fully engaged as we create an owner-operator mindset, and we are gaining momentum. In addition, Chrysler has a strong partnership with its parent company, Cerberus Capital Management, and has ample liquidity and is fully funded with working capital to meet its present and future needs and objectives."

Under Cerberus control, LaSorda was made president and vice chairman.

LaSorda's bonuses first drew criticism last fall while the automaker was in negotiations with UAW over a new labor agreement.

In recent weeks, UAW President Ron Gettelfinger has been vocal about the size of executive paychecks at the automakers, saying they need to make sacrifices along with the rank-and-file workers. The UAW agreed to a contract that allows new hires to so-called noncore jobs to begin making roughly half the wage of current workers.

Erich Klemm, the top German labor representative on DaimlerChrysler AG's supervisory board, called the bonuses to LaSorda and former Chief Operating Officer Eric Ridenour unreasonably high in a German newspaper last fall.

The exact amounts were not made public at the time.

Wednesday's filings show that LaSorda made 2.1 million euros in base salary, benefits, shares, stock and bonuses.

In addition, LaSorda was paid a 10.4-million euro bonus as part of a deal he agreed to that paid him "upon the successful transfer of a majority ownership interest in Chrysler to a third party." As part of the agreement, LaSorda, who was under contract until 2012, agreed to break the contract and waived his claim to severance and pension payments.

Daimler said, "The agreements were intended to facilitate a timely and successful transaction while at the same time defining the conditions for a retirement from the board."

LaSorda had been a member of DaimlerChrysler's management board.

In addition, LaSorda was paid 1.2 million euros for prorated payments of the phantom share awards previously granted to him. Phantom shares are basically a bonus plan under which the bonus amount is based on the value of the company's stock.

Similarly, Ridenour received a compensation package worth 5.4 million euros, or $8.2 million. His bonus for the Chrysler sale was $4.8 million.

Under Cerberus control, Tom LaSorda was made president and vice chairman of Chrysler.

(MYRIAM VOGEL/AP)

The Cerberus-Chrysler deal reconsidered

Everyone is certain that it's blue skies ahead for Chrysler. Fortune's Alex Taylor asks, Is there less here than meets the eye?

By Alex Taylor III, Fortune senior editor

May 25 2007: 5:43 AM EDT

NEW YORK (Fortune) -- The business world was agog. A bold initiative involving Chrysler had just been announced that was going to reshape the automotive landscape. Global expansion was in the wind. A new business model was being created that would make General Motors and Ford (Charts, Fortune 500) look obsolete. Smart businessmen with loads of capital were taking a fresh look at the auto business and bringing ideas to the table about cutting costs and becoming more competitive. A new day had arrived.

That all happened nine years ago when Daimler-Benz merged with Chrysler. Since then, all those bright ideas have gone down the drain -- along with $36 billion of Daimler's money. The linkup that was universally described as a win-win failed to produce the expected payoff because of management inattention, cultural warfare, market shifts, and smarter, quicker competitors.

Now Cerberus Capital Management has purchased an 80 percent stake in Chrysler and will take the company private. It has said little about its plans for the automaker, but, once again, everyone is certain that it's blue skies and clear sailing ahead for Detroit's youngest and smallest automaker. Number One cheerleader CEO Tom LaSorda is out talking to employees about reinvention and the "New American Chrysler." No more boom and bust, LaSorda is saying. Let's all work hard and make it different this time.

Perhaps. But there may an alternate scenario here. After all, Cerberus was the winning bidder for Chrysler, and Daimler (Charts) is effectively paying it to take Chrysler off its hands. So there is a perception out there that Chrysler isn't worth very much as an automaker. Perhaps Cerberus is nothing but a bottom fisher looking for a cheap deal.

So far, Cerberus has said almost nothing about what it plans to do with Chrysler to change things. All it is has talked about so far is what will be the same.

• Cerberus says it will keep Chrysler's managers in place while they execute the latest turnaround plan. Wait a minute? Aren't those the same guys who masterminded last year's big inventory screw-up and brought out such ill-conceived vehicles as the Jeep Commander and Chrysler Aspen?
• Cerberus says it will keep all three of Chrysler's brands. Fine, but how is an auto company whose name is not Toyota (Charts) going to be able to pump enough money into new models to fill three branded channels?
• Cerberus says the union leadership is sympathetic to its takeover. That's good, but the union has made no representation that it will risk an uprising by its members by accepting a sharp reduction in health care benefits. Chrysler may not even get a seat at the table when health care benefits are discussed in contract negotiations this summer. The union usually picks a company with which to negotiate first and GM (Charts, Fortune 500) is considered the likely target.

Here's what we can reasonably guess about Cerberus. It will take an outsider's look at the business, put a sharp pencil to the operations, and move faster and smarter than the Germans could.

It will also be looking for a quick return on the $7.4 billion it is putting into Chrysler - perhaps as quick as three or four years. Quick returns are not what you expect in the auto business, where it takes three or four years just to get a new model into production. So Cerberus will be focused more on the expense portion of the income statement than the revenue part.

Since automotive assets are not exactly yielding top dollar these days, Cerberus' most likely strategy would seem to be to dress Chrysler up for a sale to another automaker - probably a foreign one. Scale still counts and there are numerous companies in Europe and Asia who would like to control Chrysler's market share and distribution network.

Nobody wishes ill of Chrysler. But we've all seen the danger in reading too much into mostly hopeful signs, only to be disappointed later on. The company that invented the minivan, popularized the sport utility vehicle and revived the convertible has had numerous opportunities to put itself on a stable footing over the past three decades and flubbed them all. We should all take a deep breath and relax before saying "it is going to be different this time."

Video More video

Lee Iacocca talks with Fortune senior editor Alex Taylor about why a Chrysler buyout would break his heart. (April 16) Play video

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CNN's Ali Velshi talks about the major deal to sell the automaker. (May 14) Play video

Chrysler's buyer kicks tires

Private equity firm Cerberus is examining automaker for any hidden flaws

Mcclatchy-tribune

Originally published May 24, 2007

DETROIT // The selling of Chrysler is not a done deal - yet.

Cerberus Capital Management will spend the next few weeks - if not months - finalizing the deal, conducting further double-checking and settling details before signing on the dotted line to acquire the Chrysler Group from DaimlerChrysler AG.

Cerberus appears to be pushing hard for an early July closing date, a move that could remove a layer of complications from forthcoming labor negotiations with the United Auto Workers.

"You've got to check everything out. It's just like a home inspection," Chrysler spokesman Jason Vines said. "They looked at the basement, didn't see any leaks. Noticed the roof is pretty solid, but there are a few rooms they probably want to look at."

Dieter Zetsche, DaimlerChrysler AG's chief executive, has referred to Chrysler-Cerberus as a mature deal, indicating that it is far along in the process. Cerberus officials have occupied temporary space on the 15th floor of the Chrysler tower in Auburn Hills, Mich., meeting with executives and labor leaders in recent days.

No one is saying the Cerberus-Chrysler deal is likely to fail; rather they note that it is not final yet and that some deals do not get done. "Something extraordinarily unusual would have to happen to make this deal fall apart," said Joseph S. Phillippi, an industry analyst.

Last week, the DaimlerChrysler supervisory board agreed to the concept of the deal, which involves Cerberus spending $7.4 billion to acquire 80.1 percent of Chrysler.

The due diligence process typically involves looking "at every dimension of the business," said David E. Cole, chairman of the Center for Automotive Research.

"They have done a reasonable level of due diligence up to this point to put together their initial offer," Cole said. "Now they go in much more deeply and talk to people all throughout the company: They're into the technology, the labor agreement, the plants. ... They want to nail that down very, very tightly."

Usually Wall Street firms, such as Cerberus, insist on escape clauses in deals for such events as a sharp economic downturn, Phillippi said.

This could explain why DaimlerChrysler picked a buyer that could make a deal happen quickly.

Time also is ticking away before official talks begin in July between Detroit automakers and the UAW. The current contract ends in September.

The only official word from DaimlerChrysler about when the deal could be done is the third quarter. In an interview with a Detroit radio station last week, Chrysler CEO Thomas W. LaSorda seemed to indicate the parties are shooting for July.

A company insider indicated the company hopes for an early July closing, but Vines, the Chrysler spokesman, emphasized that no official date has been set.

"There is a lot of legal wrangling that has to happen," Vines said. "There is a push to get it done as fast as humanly possible."

Gerald C. Meyers, a University of Michigan business professor and former chief executive of American Motors, doubts the deal can be closed by July.

"This is a very complex deal," Meyers said, in large part because of labor issues.

"If they fail to get the concessions that make their numbers work, then there is going to be a great deal of unhappiness," Meyers said. "If that negotiation doesn't go well, that will put a cloud over the whole thing."

Zetsche has said the Cerberus-Chrysler deal is not contingent on a deal with the unions, but Cole said labor issues loom for Cerberus.

"When you get into due diligence and you get into the real facts of the situation, those issues are going to be there," Cole said.

"In business, lying is one of the things you do all of the time. There are things you can't talk about," he added. "There are things you just either from a legal standpoint or from a political standpoint, you can't talk about."

Longtime observers like to point out the proposed deal by Ford Motor Co. to acquire Daewoo Motor in 2000 after it beat out other automakers, including General Motors Corp., to snatch the South Korean carmaker out of bankruptcy.

After topping other competitors with a $6.9 billion offer in the summer of 2000, Ford pulled out a few months later. About a year later, GM bought a controlling interest in Daewoo for $400 million.

Mergers and acquisitions expert Brian D. Krasicky of O'Keefe & Associates said hurdles that arise at this point in a deal tend to be "things like unexpected and undisclosed liabilities."

But, he said, "I expect the deal to close regardless of the hurdles because Daimler appears to be a very motivated seller."

Publicity-shy Feinberg is in the spotlight

When the Chrysler deal was announced, Stephen Feinberg - as usual - was missing. He sent Cerberus Chairman John Snow, center. Snow is flanked by Chrysler CEO Tom LaSorda, left, and DaimlerChrysler CEO Dieter Zetsche.

Robert Sherefkin, David Barkholz and Leslie J. Allen
Automotive News
May 21, 2007 - 1:00 am

DETROIT -- Stephen Feinberg, the intensely private CEO of Cerberus Capital Management LP, is going to great lengths to prove he isn't a "strip-and-flip" takeover artist. After announcing the $7.4 billion purchase of the Chrysler group last week, Feinberg personally assured UAW leaders that Chrysler will not lay off more workers. The union accepts his pledge. But some are skeptical about Cerberus' prospects with Chrysler. How will a company that invests in paper products, swimwear, real estate, energy and glass making succeed as the owner of a troubled U.S. automaker? Big risk-taker The hedge model is pretty basic. A money manager raises billions of dollars from rich people seeking outsized returns on their investments. The fund hires bright lieutenants to research deals, recruit managers and sometimes operate troubled companies. So what distinguishes Cerberus from less successful hedge funds? Start with the people. Cerberus' corporate culture mirrors Feinberg's personal attributes: secretive, hard-nosed, fast-moving and willing to take risks - big risks. An investor quoted in New York magazine described Feinberg, 47, as "a quiet, almost anti-social guy who is a machine at investing." The machine has taken dead aim at Detroit. Once derided as a "vulture" investor for his focus on troubled companies, Feinberg has given Cerberus new respectability with a series of high-profile purchases. Before the Chrysler deal, Feinberg's sweetest victory was the acquisition last year of as majority stake in GMAC Financial Services. In doing so, Feinberg defeated one of his big rivals: buyout specialist Henry Kravis of Kohlberg Kravis Roberts & Co. While keeping his own profile low, Feinberg has brought in high-profile talent to run Cerberus. President Bush's former Treasury secretary, John Snow, is the company's chairman, and former Vice President Dan Quayle is chairman of its global investments unit. Former Ford of Europe chief David Thursfield runs Cerberus' automotive practice, and former Chrysler COO Wolfgang Bernhard is an adviser. A Cerberus corporate profile hails Bernhard as someone "credited for (the Chrysler group's) impressive turnaround between 2000 and 2005."

---

Stephen Feinberg Title: CEO, Cerberus Capital Management Born: Spring Valley, N.Y. Age: 47 Education: Princeton University, bachelor's degree in politics, 1982 Hobbies: Tennis, motorcycles Career: Launched Cerberus in 1992

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Hard-nosed deal makers

Feinberg's executives are bright, tenacious negotiators. They are formidable players because of their deep pockets, says John Groustra, a partner with the consulting firm Conway MacKenzie & Dunleavy.

"They drive a tough deal, they focus on the economics and always keep that within the framework of the deal they envision," Groustra notes.

Cerberus has had mixed results with its automotive investments. In addition to GMAC, the finance arm of General Motors, Cerberus owns bumper maker Peguform GmbH and textiles supplier Guilford Mills Inc. It is bidding to buy bankrupt supplier Tower Automotive Inc.

But Cerberus wants to dump GDX Automotive, an unprofitable supplier of sealing and acoustic materials. And it has bowed out of a group that is trying to acquire Delphi Corp.

The bottom line: Cerberus' deal makers are willing to take chances, but they will walk away from a deal quickly when it does not make sense - as they did with Delphi. "They will walk away, but not slam the door," Groustra says. "They will sit on the sidelines waiting for a competitor to stumble, and then get back into the game."

Former paratrooper

The man behind Cerberus is a reclusive Princeton University graduate who prefers working in the shadows of the private equity firm he founded in 1992. He doesn't do media interviews and reportedly hates to travel beyond his simple, unadorned offices on New York's Park Avenue.

Biographical information on Feinberg is difficult to find. According to published reports, he was born in Spring Valley, N.Y. He earned a bachelor's degree in politics from Princeton, where he was captain of the tennis team.

Feinberg is said to be a motorcyclist and a former U.S. Army paratrooper. He has been a big Republican Party contributor.

Feinberg cut his teeth in the financial world working as a trader at the buyout firm Drexel Burnham Lambert during the Michael Milken era of the 1980s.

When Feinberg formed his own firm, he named it in honor of a mythical three-headed dog that guards the gates of Hades. That fledgling company, BusinessWeek reports, started as a hedge fund trading in the debt of companies headed for bankruptcy.

Now Cerberus manages more than $25 billion in assets - not including the Chrysler group.

The hedge fund has no problem raising money. Last year Feinberg's well-heeled investors earned 15 percent after fees, according to Alpha, a hedge fund trade publication. Cerberus is so flush with cash that it is turning away new investors.

And all that cash has made it possible for Cerberus to target the big fish in the pond. After experiments with some of the smaller fry of the auto industry, Feinberg has landed a lunker.

The potential reward is great. But running a company can be a lot tougher than buying it.

"He's making a huge bet on the auto industry at many levels," says Scott Eisenberg, managing partner with the investment banking firm Amherst Partners LLC. "If he wins, he will win big; but he's taking on a lot of risk."

How Cerberus Makes Its Money on Chrysler

The private equity giant may be sincere in its desire to revive the U.S auto industry, but its real interest is making a lot of money

by David Welch

The early rhetoric about Chrysler's sale to private equity firm Cerberus Capital Management tugs at the heartstrings.

Cerberus Chairman John Snow said in an interview that American manufacturing is vital and that Cerberus would like to play a role in saving it. Sources close to Cerberus founder and CEO Stephen Feinberg, who gives few interviews, say he owns a Ford (F) pickup and has a vision to restore America's prominence in the auto industry. "Speaking as an American, [Feinberg] and I wouldn't be alone in being delighted to see this icon of American industry return to American ownership and thrive," says Snow.

That probably is part of their motivation. But this is Cerberus we're talking about. Its logo isn't a three-headed dog for nothing. Its shareholders are big pension funds that expect returns of 15% or more. So Cerberus will do what it takes to make a lot of money.

That doesn't necessarily mean Cerberus will pull what United Auto Workers President Ronald Gettelfinger weeks ago called a "strip and flip," slashing costs to make quick money and then selling the company.

No CEO Shuffle

In fact, Cerberus could conceivably fetch a fat return on its money by doing very little. Consider Cerberus' low purchase price of $7.4 billion. Lehman Brothers (LEH) analyst Brian Johnson said in a research note that at most $2.2 billion of the purchase price was for Chrysler's carmaking operations. The other $5.2 billion or so bought Chrysler Financial Services, which made about $720 million last year and remains solidly in the black, according to Johnson.

If the restructuring moves that parent Daimler announced in February work, and Chrysler makes $1.5 billion to $2 billion in 2009 like the company said, then Cerberus makes a 68% profit on its investment over about a two-and-a-half-year period. That's at least 27% a year from the car business.

The fact that Cerberus has kept Chrysler's management team on board, including CEO Thomas LaSorda,, suggests that Cerberus thinks the company's current restructuring is enough. "That suggests to me they pretty well buy into LaSorda's turnaround plan," says investor Wilbur Ross, who has successfully bought other industrials like steelmakers and auto parts firms and turned them around. "LaSorda believes that in 2009 they could make $2 billion. If they do, that's already a pretty good return on Cerberus' investment," he adds. (To read more of Ross' thoughts on the Cerberus/Chrysler deal, see BusinessWeek.com, 5/15/07, "Wilbur Ross: 'No Chapter 11 Here.'")

Unloading Liabilities

And that's just on the earnings. Like every private equity firm, Cerberus will eventually sell Chrysler either to the public markets with an initial public offering or perhaps to another automaker. That's where Cerberus may really have something else going for it. When the Big Three sit down this summer to craft a new four-year labor deal, the big item will be walling off Detroit's massive health-care liabilities into a separate fund managed by the union. By the end of the year, the three carmakers will have a collective health-care liability of $120 billion that burns billion in cash and profits every year.

The basic premise is that Chrysler, Ford, and General Motors (GM) would each give the UAW a massive coffer of cash and securities worth, say, 60% to 70% of the liabilities.

If the union agrees, accepts the fund, and takes over management of health care for workers and retirees, that would wipe most of the liabilities off the books of each company. It also would greatly reduce the cash and profit burn. The union can invest the funds so the workers have uninterrupted health-care coverage.

Bad Times for Gas-Guzzlers

This would be a huge boon for Cerberus. They bought Chrysler at a massive discount and might be able to sell it in a few years without the health-care issues that have been a bane for investors. "I'm not suggesting that this would fix these companies, but it's step No. 1," says JPMorgan (JPM) analyst Himanshu Patel. "If you remove health-care liabilities, you remove a cancer within the system that kept a lot of investors away."

There are plenty of things that could trip Cerberus up on its way to making billions off Chrysler. First, Chrysler's business could easily deteriorate further. Gasoline prices have topped $3 a gallon nationally, and about 70% of Chrysler sales come from fuel-hungry pickups, sport-utility vehicles, and minivans. That means market share could continue to slide, and profits from the bulk of Chrysler's lineup could keep slipping.

If that happens, Chrysler may need to do more than just cut one assembly plant and 13,000 jobs, as LaSorda announced in February. It might mean that Chrysler would have to buy out more workers, which could end up costing Cerberus even more for restructuring.

Network Disconnection

Cerberus also wants to spend more on new models, both to get into segments like passenger cars, where Chrysler is weak, and to improve the models they're already selling. Right now, Chrysler spends about $3 billion a year on new products. Cerberus wants to spend more.

Cerberus may also have to spend lots of cash to buy out car dealers and thin Chrysler's bloated network. Cerberus has a credit line of $12 billion and may have to take on debt to truly fix the company.

No one said it would be risk-free. "We believe Chrysler is poised for better results," Snow said, but he conceded that "it won't be easy." No, it won't. But if Cerberus and Chrysler play it right, the deal might work, and there could be big rewards.