Hedge funds and Private Equity - PES

Peguform
1. Company description
The history of Peguform started in 1959 with the Baden-Plastic Werke in Bôtzingen which produced
plastic products (films and household goods). However, it was first in 1978 that the company
name “Peguform-Werke AG“ was introduced. At the same time the company entered the
automotive market (bumpers, exterior systems, cockpits and instrument panels and interiors),
which is today the single focus of Peguform. In 1999 Venture Industries, an American auto supplier,
took over the Peguform Group. In May 2002 the management of the German companies
applied for preliminary insolvency. In October 2002 the insolvency procedure was opened. After
reorganization, which was possible due to participation by employees and financial guarantees
provided by customers, the American private equity fund Cerberus took over the Peguform Group
(Germany, Spain, Mexico, and Brazil).
2. Economic and social effects
2.1 LBO description (offshore base, activity focus, etc.)
Cerberus Capital Management LP is a large privately owned investment fund. The firm is based
in New York. The fund was founded in 1992, and Cerberus invests primarily in companies which
are near bankruptcy and hopes to make the businesses it acquires profitable.
Cerberus’ financial contributors are mainly US pension funds and wealthy individuals. Cerberus
invests capital in real estate and financing corporate takeovers. In addition, the US investor has
specialized in the purchase and use of loans in default. The company has been a voracious acquirer
of businesses over the past several years and includes sizeable investments in sportswear,
paper products, military services, real estate, energy, retail, glassmaking, transportation, and
building products. Its holdings amounted to $16 billion in 2005. Cerberus currently has significant
investments in companies around the world.
2.2 Effects on job creation, investments in training and education
of labour force, investment in innovation
After filing for insolvency in 2002, the well-known insolvency administrator Dr. Jobst Wellensiek
together with the Rothschild Investment Bank drew up a list of potential buyers. Three financial
investors and three strategic investors made offers and the offer of Cerberus was
accepted. All potential buyers required a reduction of operating costs. They all required from
employees a reduction in personnel costs of 40 million euros, which represented approximately
one sixth of the total personal cost of 260 million euros. This was agreed in a reorganization collective
contract together by the IG BCE employees and Cerberus. For the most part, an increase
in working time to 39 hours per week without an increase in salary, and an income reduction of
4 percent was established. Also agreed was a reduction of Christmas and holiday pay. Thus the
burden was around 10 percent per employee, including those not covered by the collective contract
and senior managers. The contract is valid for five years. Collective pay raises will only be
implemented by half. Lay offs are possibly only with the consent of the works council. For
reductions in capacity due to the evolution of the auto industry, personnel adoptions are possible
in accordance with an opening clause.
Annex – 21 Case studies
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