May 1 (Bloomberg) -- Cerberus Capital Management LP, whose investment in Chrysler LLC’s auto-making operations evaporated into bankruptcy yesterday, might yet find a way to cut its loss or eke out a gain in the car business.

As part of the agreement with the U.S. government, the New York-based private equity company held on to its ownership of Chrysler Financial, the unit that will service Chrysler’s existing loans. New loans for dealers and consumers will come from GMAC LLC, of which Cerberus is a minority owner.

Cerberus, headed by Chief Executive Officer Stephen Feinberg, spent about $15 billion in 2006 and 2007 for majority stakes in Auburn Hills, Michigan-based Chrysler and GMAC, the former financing arm of General Motors Corp.

“The financing business may still be profitable, or at least won’t be a huge dog for Cerberus,” said Elizabeth Nowicki, a professor at the Tulane University School of Law in New Orleans. “There’s some room for mitigation.”

A Cerberus spokesman declined to comment today. In a statement yesterday, Chief Operating Officer Mark Neporent said the company has “worked diligently” with the government and other parties on the bankruptcy and expected a quick resolution.

Cerberus, with about $24 billion in assets, reduced its ownership in GMAC to a minority stake from 51 percent in December when it converted the financing arm into a bank holding company. As part of GMAC’s agreement to become a bank in exchange for $6 billion in federal assistance, Cerberus’s voting control is being cut to less than 15 percent.

Four-Year Plan

The contract includes a four-year agreement to be the preferred provider of incentive-based retail financing, Detroit- based GMAC said yesterday in a statement.

The agreement signaled to investors that the Obama administration is committed to keeping GMAC alive, Gimme Credit LLC’s Kathleen Shanley wrote in a report today.

GMAC reported its first quarterly profit in February after five losses. It will report first-quarter results May 5.

GMAC’s 8 percent bonds due in 2031 soared 48 percent yesterday to 61.3 cents on the dollar, bringing their gains last month to 70 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Cerberus paid $7.4 billion for 80.1 percent of Chrysler in 2007; about $1.2 billion of that was cash from Cerberus’s funds, with the rest coming from co-investors and borrowed money.

“They just made a bad bet,” Tulane’s Nowicki said. “There’s no sense crying for Cerberus.”

To contact the reporter on this story: Jason Kelly in New York at jkelly14@bloomberg.net

Last Updated: May 1, 2009 14:21 EDT