September 30, 2022

Inside Asia: Turning on the Lights in Pakistan

KARACHI, Pakistan — Since Pakistan’s biggest electricity company was privatized, its headquarters has been looted, its employees kidnapped and its boss nearly arrested by the government.

Despite all of that, it is regarded as a roaring success.

Power cuts lasting 12 hours a day or more have devastated the Pakistani economy. The loss of millions of jobs has fueled unrest in a nuclear-armed nation already beset by a Taliban insurgency.

The only city bucking the trend is the violent metropolis of Karachi, Pakistan’s financial heart — and that is thanks to Tabish Gauhar and his team at the Karachi Electricity Supply Co.

“It has consumed every ounce of my energy,” Mr. Gauhar, 42, said in an interview. “But we have helped millions of people.”

The new government of Prime Minister Nawaz Sharif won an election in May partly because it had promised to fix the power cuts. Now many are wondering whether the Karachi utility’s successful privatization will be repeated elsewhere.

Pakistan’s power companies share similar problems. Workers are often corrupt, and influential families rarely pay bills. The government sells power below the cost of production but pays subsidies late or not at all. Plants cannot afford fuel.

At the state-run Peshawar Electricity Supply Co., the majority of workers are illiterate, most new hires are relatives of existing staff members, and 37 percent of the power generated was stolen, according to a 2011 audit funded by the U.S. Agency for International Development.

Karachi Electricity Supply had all the same problems when the Dubai-based private equity firm Abraaj Capital bought a controlling stake in 2008. Mr. Gauhar and his Abraaj team decided to slash the work force by a third, cut off nonpayers and destroy illegal connections.

The moves started a small war.

Employees who had been laid off offered to work for free because they had made such fat kickbacks. When management refused, thousands of protesters ransacked the company’s headquarters. They camped outside for months.

Gunmen attacked Mr. Gauhar’s house. Workers crossed picket lines every day, hunkered down on the floors of police cars. More than 200 employees of the utility were injured.

“We felt very lonely then,” said Mr. Gauhar, who moved from chief executive to chairman of Karachi Electricity Supply earlier this year. “When I used to visit one of our injured employees in the hospital, it was hard for me to look them in the eye.”

Many in the populist pro-labor government vilified the power company. Later, legislators tried to arrest Mr. Gauhar on charges that he had not attended subcommittee meetings in the capital.

After the protests dissipated, Karachi Electricity Supply’s next problem was making customers pay. More than a third of the company’s electricity was stolen in 2009. Those who got bills often ignored them.

One wealthy patriarch said he could not possibly start paying because his colleagues would think he had no influence left.

Karachi Electricity Supply started cutting off those who did not pay their bills. When a transformer burned out in an area with high theft, the company asked for two months’ worth of payment from the area’s residents before replacing it.

The company divided up the city of 18 million. Areas where 80 percent of people pay bills now have no regular power cuts. Areas with high loss — often crime-ridden, sweltering slums — have long power cuts. Karachi Electricity Supply is widely hated in such places.

Muhammed Fayyaz, who works as a driver, says his neighborhood often has as much as 10 hours of cuts per day. Summer temperatures top 40 degrees Celsius (104 Fahrenheit), and protests are frequent.

“People block the main road and throw stones at passing vehicles,” he said.

Mr. Fayyaz lives in a high-theft area. Stealing power is easy. Makeshift wires with metal hooks festoon Karachi Electricity Supply’s lines in the sun-baked streets. Some lead to roadside businesses. Others head into the distance atop lines of makeshift bamboo poles.

“We clean them up, but in five minutes they are back again,” said Muhammad Siddiq, a manager at the utility.

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DealBook: Private Equity Capitalizes on Chinese Firms’ Depressed Shares

HONG KONG – If you can’t buy them, bankrupt them.

Three months ago, Ambow Education Holding, a troubled operator of tutoring centers in China that was listed on the New York Stock Exchange, was the target of a $108 million privatization bid by Baring Private Equity Asia.

On Monday, Baring emerged as one of several big shareholders that had succeeded in pushing Ambow into provisional liquidation by a court in the Cayman Islands, where the company is registered, after a dispute with management over an investigation into possible financial misconduct.

Rapid downfalls have not been uncommon among Chinese companies listed in the United States in recent years, after a wave of accounting scandals led to a broad sell-off of such stocks. At the same time, a growing number of private equity firms have sought to capitalize on depressed share prices of Chinese companies by making buyout offers.

But Ambow’s situation stands out.

“Perhaps no company ever transited as quickly from a private equity firm’s sought-after takeover target to being liquidated,” said Peter Fuhrman, chairman of China First Capital, an investment bank and advisory firm based in Shenzhen, China.

Ambow was taken public in 2010 in a $107 million deal led by JPMorgan Chase and Goldman Sachs. Its market value rose to more than $1 billion that year but came under pressure throughout 2011, along with many other Chinese stocks.

Then in July 2102, Ambow disclosed in stock exchange filings that a former employee had come forward claiming “financial impropriety and wrongful conduct” related to the company’s purchase of a training school in China in 2008.

Ambow said it had hired outside lawyers to help its audit committee carry out an internal investigation of the matter and that it would not comment further. Its shares promptly dropped by half, from more than $4 apiece to just over $2, then continued to slide until early this year.

Baring, a firm based in Hong Kong that used to be part of the Dutch financial services company ING, began its privatization bid for Ambow on March 15 at $1.46 per American depositary share. It was a 45 percent premium to the share price at the time.

Then things got messy. On March 18, three of Ambow’s four independent directors resigned. On March 22, the law firm Fenwick West resigned after nine months of leading the investigation into possible financial misconduct. That same day, the Chinese affiliate of PricewaterhouseCoopers, also known as PwC, resigned as Ambow’s auditor.

“In its letter, PwC stated it was resigning as a result of its concerns that the investigation may not be given the necessary resources and time, and the presence of existing management may make conducting an investigation of the scope that PwC believes is warranted unlikely,” Ambow said in a filing. The New York Stock Exchange suspended trading in the shares.

Baring withdrew its privatization bid on March 25, 10 days after it was made, citing the resignations and the trading suspension. It said in a letter that “as a result of these unexpected events, we have concluded that it is not possible for us to proceed.”

The petition to the Cayman court to liquidate Ambow was filed in April by a fund run by the Asian unit of the Avenue Capital Group, a New York investor in distressed stocks and bonds that owns 21.6 percent of Ambow’s shares.

According to filings on Monday to the United States Securities and Exchange Commission announcing the success of the petition, the move was supported by Baring, which has a 10 percent stake in Ambow, and an investment unit of the Australian bank Macquarie, which holds an 11.6 percent stake.

The petition accused Ambow’s chief executive, Jin Huang, of abusing her power in relation to the investigation into possible financial misconduct and of “obstructionist tactics designed to entrench her control of Ambow.”

In a statement last month, Ambow firmly rejected the accusations, saying there was “no basis” for any of the claims and that “the filing of the petition and the relief it seeks are wholly inappropriate.”

In its ruling on Friday, the Cayman court appointed the auditing firm KPMG as provisional liquidator for Ambow. KPMG will also take control of the investigation into possible financial misconduct.

The situation is complicated because Ambow’s operating business — like many Chinese companies listed in the United States — is based in China but controlled by the offshore-registered listed company through a series of complex holding structures called variable interest entities, or V.I.E.’s.

One such foreign control structure was recently ruled invalid by China’s highest court.

“Right now our control over the operating assets in China has been quite limited,” Tiffany Wong, a partner at KPMG China and herself one of the court-appointed liquidators, said on Tuesday. “We haven’t got access to the books and records of company at the moment.”

Monday, Tuesday and Wednesday are public holidays in mainland China, and Ms. Wong plans to meet with Ambow management in Beijing later this week. “We will be seeking to stabilize the company,” she said.

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Behind the Chinese Bid for Smithfield Foods

But behind the bid was a group of savvy investors and global deal makers who hold a substantial stake in the Chinese company: Goldman Sachs, CDH Investments, Singapore’s sovereign wealth fund and New Horizon Capital, a private equity firm co-founded by the son of the former Chinese prime minister Wen Jiabao.

The group controls nearly half the shares of Shuanghui International, much of which was acquired about seven years ago by helping privatize a company that had been run as a state-owned meat processor.

Today, Shuanghui is a $7 billion behemoth that is the dominant sausage maker and pork processor in China. The company is now seeking to complete the biggest Chinese acquisition ever of an American company.

The bid is subject to a national security review by the Committee on Foreign Investment in the United States, and that scrutiny will include a review of shareholder records.

Analysts say the Chinese company’s ownership structure is unlikely to complicate the review, since Shuanghui is not state-owned.

But the presence of so many of Asia’s power brokers in the bid illustrates not just how deals get done in China these days but also how Wall Street and Asia’s elites are likely to collaborate on future cross-border mergers and acquisitions.

America’s biggest private equity firms already have a major presence in China, with TPG, the Carlyle Group and Blackstone seeking deals. Often they co-invest alongside Asia’s biggest investment firms. One of the best-known is CDH Investments, a private equity and venture capital firm that manages more than $7 billion in assets with operations in Beijing. Founded in 2002, the company has invested in big food makers, like Mengniu Dairy, the Yurun Food Group and Shuanghui.

In 2006, CDH and Goldman Sachs led a consortium of investors who paid about $250 million to buy out the Chinese government’s stake in Shuanghui in the hopes of transforming the company into one of China’s biggest food companies.

Before the deal, Shuanghui’s ambitious chairman, Wan Long, was pressing to privatize a company under state control and saddled with operating its own school, hospital and employee housing. Mr. Wan said he wanted to focus on the core business.

“We should talk about pigs because all I know is pigs,” he joked during an interview at the company’s headquarters in Henan, several years ago. “We call the slaughter industry the sunshine business. Although it’s a traditional business, if you do it well, it is a sunshine and profitable business.”

But he made his ambitions clear: “Our goal is to be the biggest in China, and the leading meat supplier in the world.”

To revamp Shuanghui, Mr. Wan, who is 72 and still chairman, turned to CDH and Goldman Sachs. The move brought in foreign capital and other big investors, including Temasek, Singapore’s sovereign wealth fund, and New Horizon Capital.

An investment fund controlled by the Kwoks, one of Hong Kong’s richest families, also got a stake in the meat processor.

Soon after, Shuanghui set up an offshore entity, based in the Cayman Islands, which one of the company’s advisers said would be used to acquire Smithfield Foods, with financing help from Morgan Stanley, the company’s banker in the deal.

People involved in the deal say Goldman and CDH were the lead investors and that other investors played more passive roles.

Shuanghui’s management retains the majority stake in the company at around 36 percent of shares, but has more voting rights than other shareholders. The next biggest stake is CDH, at about 34 percent. Goldman and New Horizon each have about 5 percent and Temasek holds around 3 percent.

When the Beijing-based New Horizon was run by Winston Wen, also known as Wen Yunsong, the firm put about $20 million into Shuanghui in 2006.

Mr. Wen left New Horizon in 2010 after some in the industry criticized his company’s aggressive deal-making. He was later named chairman of the China Satellite Communications Corporation, a state-owned entity. It is unclear whether he or his relatives still have a stake in New Horizon, which is run by some of his former college classmates.

But in 2012, about a year after Shuanghui was hit by a food safety scandal involving the illegal additive clenbuterol, Mr. Wen’s father, who was then China’s prime minister, visited the company’s factories and headquarters. He encouraged its workers to put food safety first, saying that if the company made “unremitting efforts” it would shine brightly.

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DealBook: In Europe, Risks and Opportunities

BERLIN – Is Europe a risk or an opportunity?

As its economies struggle, private equity managers offer differing views about the region.

Speaking at the SuperReturn conference in Berlin, Henry R. Kravis, co-founder of Kohlberg Kravis Roberts, said Europe was an attractive market, particularly the Continent’s southern countries, which have been hit by high unemployment and meager growth.

“I like Spain, they are doing a number of right things,” Mr. Kravis told a somewhat empty conference room early on Thursday morning after many private equity managers had attended late-night dinners the previous evening. “In Europe, there clearly are opportunities. I may be in the minority.”

Other private equity giants, including David M. Rubenstein of the Carlyle Group, are also scouting for opportunities from Italy to Ireland despite concerns that the Continent may fall back into recession.

Lionel Assant, European head of private equity at the Blackstone Group, liked Spain because of its close ties to fast-growing Latin American markets and efforts to revamp its local labor market.

Not every manager is so bullish, however.

J. Christopher Flowers, whose private equity firm bought an insurance broker from the struggling Belgian bank KBC for 240 million euros ($315 million) in 2011, said the future of the euro zone remained a major risk.

Europe’s recovery prospects were hurt again this week after Italian national elections on Monday failed to provide a definitive winner. The political impasse prompted significant losses in the Continent’s stock markets as investors fretted about the future of one of Europe’s largest economies.

For Mr. Flowers, there are still some potential investment opportunities, including the pending forced sale of bank branches in Britain from the nationalized Royal Bank of Scotland. The United States, however, still remains his preferred region in which to invest.

“If a major economy like Spain defaults, we would prefer to be in Germany,” Mr. Flowers said. “If I had to pick one region, I would pick the U.S.”

This post has been revised to reflect the following correction:

Correction: February 28, 2013

An earlier version of this article contained an incorrect conversion of 240 million euros. It is the equivalent of $315 million, not $310.

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DealBook: Microsoft May Back Dell Buyout

A Dell Sx2210t touch monitor running Windows 7 in 2009.Shannon Stapleton/ReutersA Dell Sx2210t touch monitor running Windows 7 in 2009.

The effort to take Dell private has gained a prominent, if unusual, backer: Microsoft.

The software giant is in talks to help finance a takeover bid for Dell that would exceed $20 billion, a person briefed on the matter said on Tuesday. Microsoft is expected to contribute up to several billion dollars.

An investment by Microsoft — if it comes to pass — could be enough to push a leveraged buyout of the struggling computer maker over the goal line. Silver Lake, the private equity firm spearheading the takeover talks, has been seeking a deep-pocketed investor to join the effort. And Microsoft, which has not yet made a commitment, has more than $66 billion in cash on hand.

Microsoft and Silver Lake, a prominent investor in technology companies, are no strangers. The private equity firm was part of a consortium that sold Skype, the online video-chatting pioneer, to Microsoft for $8.5 billion nearly two years ago. And the two companies had discussed teaming up to make an investment in Yahoo in late 2011, before Yahoo decided against selling a minority stake in itself.

A vibrant Dell is an important part of Microsoft’s plans to make Windows more relevant for the tablet era, when more and more devices come with touch screens. Dell has been one of the most visible supporters of Windows 8 in its products.

That has been crucial at a time when Microsoft’s relationships with many PC makers have grown strained because of the company’s move into making computer hardware with its Surface family of tablets.

Frank Shaw, a spokesman for Microsoft, declined to comment.

If completed, a buyout of Dell would be the largest leveraged buyout since the financial crisis, reaching levels unseen since the takeovers of Hilton Hotels and the Texas energy giant TXU. Such a deal is taking advantage of Dell’s still-low stock price and the abundance of investors willing to buy up the debt issued as part of a transaction to take the company private. And Silver Lake has been working with Dell’s founder, Michael S. Dell, who is expected to contribute his nearly 16 percent stake in the company to a takeover bid.

Yet while many aspects of the potential deal have fallen into place, including a potential price of up to around $14 a share, talks between Dell and its potential buyers may still fall apart.

Shares of Dell closed up 2.2 percent on Tuesday, at $13.12. They began rising after CNBC reported Microsoft’s potential involvement in a leveraged buyout. Microsoft shares slipped 0.4 percent, to $27.15.

Dell’s founder, Michael S. Dell, attended the unveiling of Microsoft’s Windows 8 operating system last year in New York.Lucas Jackson/ReutersDell’s founder, Michael S. Dell, attended the unveiling of Microsoft’s Windows 8 operating system last year in New York.

Microsoft’s lending a hand to Dell could make sense at a time when the PC industry is facing some of the biggest challenges in its history. Dell is one of Microsoft’s most significant, longest-lasting partners in the PC business and among the most committed to creating machines that run Windows, the operating system that is the foundation of much of Microsoft’s profits.

But PC sales were in a slump for most of last year, as consumers diverted their spending to other types of devices like tablets and smartphones. Dell, the third-biggest maker of PCs in the world, recorded a 21 percent decline in shipments of PCs during the fourth quarter of last year from the same period in 2011, according to IDC.

In a joint interview in November, Mr. Dell and Steven A. Ballmer, Microsoft’s chief executive, exchanged friendly banter, as one would expect of two men who have been in business together for decades.

Mr. Dell said Mr. Ballmer had gone out of his way to reassure him that Microsoft’s Surface computers would not hurt Dell sales.

“We’ve never sold all the PCs in the world,” said Mr. Dell, sitting in a New York hotel room brimming with new Windows 8 computers made by his company. “As I’ve understood Steve’s plans here, if Surface helps Windows 8 succeed, that’s going to be good for Windows, good for Dell and good for our customers. We’re just fine with all that.”

Microsoft has been willing to open its purse strings in the past to help close partners. Last April, Microsoft committed to invest more than $600 million in Barnes Noble’s electronic books subsidiary, in a deal that ensures a source of electronic books for Windows devices. Microsoft also agreed in 2011 to provide the Finnish cellphone maker Nokia billions of dollars’ worth of various forms of support, including marketing and research and development assistance, in exchange for Nokia’s adopting Microsoft’s Windows Phone operating system.

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Media Decoder Blog: Tribune Company Names Peter Liguori as Chief After Ending Bankruptcy

Peter Liguori, a longtime television executive, was named the new chief executive of the Tribune Company on Thursday, two and a half weeks after the newspaper and television station owner emerged from a wrenching four-year bankruptcy process.

Mr. Liguori’s appointment had been expected for more than a month.

Analysts expect Tribune to sell some of its newspaper assets and rely more heavily on its television stations and Web sites as it restructures itself in the months ahead.

Tribune’s newspaper holdings include The Chicago Tribune, The Los Angeles Times and The Baltimore Sun. In an interview with The Los Angeles Times on Thursday, Mr. Liguori acknowledged that there were potential buyers for some of the newspapers and that “it is my fiduciary responsibility to hear them out and see if in fact their interest is real and their commitment is concomitant with the value of these newspapers.” But he also emphasized an internal goal to maximize revenue from the newspapers.

In an e-mail message to employees, Mr. Liguori brought up the television stations first, saying, “We must find efficient ways to create our own fresh programming.” When he brought up the newspapers, he said, “We must accelerate our digital offerings and get paid for them.”

Mr. Liguori is best known for his time at News Corporation, where he ran the popular cable channel FX and then became the chairman of entertainment for Fox Broadcasting. In 2009, he joined Discovery Communications as chief operating officer.

Eddy W. Hartenstein, Tribune’s previous chief executive, will remain the publisher of The Los Angeles Times and will be a special adviser to Mr. Liguori’s office, Tribune said Thursday.

The company also said Bruce Karsh, the president of the private equity firm Oaktree Capital Management, had been elected the chairman of Tribune’s new board. Oaktree owns nearly a quarter of Tribune. Mr. Karsh said in a statement: “The company is well-positioned across its markets and now has a strong balance sheet, significant liquidity and low debt, so there is a lot of opportunity ahead.”

This post has been revised to reflect the following correction:

Correction: January 18, 2013

Because of an editing error, an earlier version of this article misstated when The Los Angeles Times interview with Peter Liguori occurred. It was Thursday, not last week.

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News Analysis: Momentum Seems to Build for Gargantuan Buyout of Dell

Michael Dell, the chairman and chief executive of Dell.Kimihiro Hoshino/Agence France-Presse — Getty ImagesMichael Dell, the chairman and chief executive of Dell.

Dell is advancing toward a goal many thought was all but unattainable since the financial crisis: a leveraged buyout worth more than $20 billion.

The company is in talks with investment firms and its founder, Michael S. Dell, over a deal that would take the technology company off the public markets, people briefed on the matter said on Tuesday.

One potential transaction that appears to be gaining steam is one that would be led by Silver Lake, a private equity firm that focuses on technology deals, one of these people said. The investment shop has already tasked a number of banks — Bank of America Merrill Lynch, Barclays, Credit Suisse and Royal Bank of Canada — with lining up the enormous amount of financing that would be needed, perhaps as much as $16 billion.

Silver Lake is also sounding out potential partners that could help contribute equity financing for the deal, a group that may include wealthy Asian investors, this person said.

Dell is contemplating using some of its enormous store of cash, totaling about $11.3 billion as of Nov. 2, to help defray the deal’s cost. It may do so even though more than 80 percent of its cash is held overseas, and bringing it home could generate a big tax penalty.

Mr. Dell is expected to contribute his roughly 16 percent stake in the company to the deal, helping to lower the ultimate price tag. His shares as of Tuesday’s market close were worth about $3.6 billion. It is unclear whether he would invest additional money as part of a buyout.

Nonetheless, the deal talks appear to have momentum, although one of the people briefed on the matter cautioned that they could still fall apart.

Representatives for Dell, Silver Lake and the banks declined to comment.

Should a deal come together, it would be the most radical step yet to revive a company once so profitable that it gave rise to a class of “Dellionaires” during the Internet boom.

Mr. Dell, who founded the computer maker in his dorm room in 1984, has long cast about for a solution to a world where revenue from personal computer sales has consistently fallen in recent years.

Behind any move to take Dell private is the hope that, freed from the tough scrutiny of public shareholders, the company can continue moving into the more lucrative and stable market of providing hardware and software services for corporations.

The company’s stock had fallen nearly 48 percent in the five years through last Friday, the day before Bloomberg News reported Dell’s talks with private equity firms. Since then, the stock price has climbed 21 percent.

A leveraged buyout of Dell would be one of the biggest private equity transactions since the Blackstone Group acquired Hilton Hotels for $25 billion more than five years ago. To date, no leveraged buyout announced since the financial crisis has surpassed the $7.2 billion that Kohlberg Kravis Roberts and others paid for the Samson Investment Company, an oil and gas driller, in fall 2011.

In part, that has been a matter of logistics. Leveraged buyouts require private equity firms to put money down, much as borrowers do for a mortgage. On average, that amount has been around 30 percent of the overall deal price, meaning that the equity required for a Dell takeover could be significant.

That is why Silver Lake is seeking to bring in at least one partner to help buoy a bid, one of the people briefed on the matter said.

But private equity firms have also taken pains to avoid club deals, in which two or more of them partner together to buy a company. Investors in these firms have complained that the practice essentially multiplies their exposure to a particular transaction.

Private equity firms aren’t fond of them because they essentially erase the distinctions between competitors, potentially making it harder to raise money for new funds.

Any deal would also require a seemingly daunting amount of debt financing, raised from bank loans and junk-bond sales. Several deal makers have expressed confidence in their ability to raise that money, given a hunger among investors for bonds that yield even a few percentage points more than Treasury bonds.

The co-head of JPMorgan Chase‘s global debt capital markets, Jim Casey, told CNBC in October that his firm could raise $15 billion to $25 billion in noninvestment-grade debt for a single transaction.

Some of the other obstacles to a Dell takeover lie specifically with the company. It already bears $4.9 billion in long-term debt — and that is before it assumes the enormous amount that would come from a private equity deal.

While Dell still reports a healthy amount of cash from operations, totaling $3.7 billion for the year ended Nov. 2, much of that could be consumed with paying down debt. A. M. Sacconaghi, an analyst with Sanford C. Bernstein, estimated on Tuesday that the company could pay about $820 million in interest payments each year.

Analysts have questioned whether a private Dell would have the capital to pay for acquisitions, which has been an important vehicle for expanding into new markets. Last year alone, the company struck 10 deals, including the $2.4 billion purchase of Quest Software.

“With a large debt load, we believe Dell would have a more difficult time acquiring smaller enterprise companies — making it harder to diversify away from PCs,” analysts with Barclays wrote in a research note on Tuesday.

“We would be quite surprised if a transaction would take place.”

Ben Protess contributed reporting.

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Chrysler Pauses to Mark an Unlikely Comeback

The smallest of the American automakers kicked off the annual Detroit auto show on Monday with new versions of two Jeep models, the Grand Cherokee and Compass, that have helped turn the company around since its government bailout and bankruptcy in 2009.

Chrysler outperformed the industry last year with a 20.6 percent increase in domestic sales in a market that grew by 13.4 percent. By comparison, sales increased just 3.7 percent at General Motors and 4.7 percent at Ford.

Sergio Marchionne, the chief executive of both Chrysler and its Italian parent Fiat, said Monday he expected Chrysler’s upward sales trend to continue this year, particularly in pickup trucks and SUVs.

“I think there’s a general feeling that the U.S. market is in healthy shape,” Mr. Marchionne said in a meeting with reporters. “And we’re certainly going to improve in the market.”

Last year was a stellar one for Chrysler. Its bread-and-butter products like the Grand Cherokee and the Ram pickup had big gains, and new cars like the Dodge Dart began to mitigate the company’s traditional reliance on larger vehicles.

Now Mr. Marchionne is laying plans to build a new, entry-level Jeep at an underutilized Fiat plant in Italy – evidence of how the American company is shepherding its European parent company through difficult times.

Sales of Chrysler products now account for more than 60 percent of the total vehicles sold under the Fiat corporate umbrella, which also includes brands like Alfa Romeo and Maserati.

When Mr. Marchionne negotiated Fiat’s acquisition of Chrysler during its federal bailout, industry executives were skeptical that the American company could thrive after the failures of its previous owners, the German carmaker Daimler and the private-equity firm Cerberus.

Now, however, “it’s not Fiat saving Chrysler, it’s Chrysler saving Fiat,” said David Cole, a founder of the Center for Automotive Research in Ann Arbor, Mich.

Mr. Marchionne said a key part of Chrysler’s growth will come from its iconic Jeep brand, which has updated its rugged image with better fuel efficiency and improved quality.

The company showed off the first diesel-engine version of the Grand Cherokee on Monday, which officials said could get 30 miles per gallon in highway driving.

A new version of the Jeep Liberty is scheduled to be introduced later this year, Mr. Marchionne said, as is the compact Jeep that will be built alongside a Fiat model in the Italian plant.

The plan helps solve Fiat’s glaring overcapacity issues in Europe, where vehicle sales have dropped to their lowest level in years. It also represents an aggressive step to grow the Jeep brand outside the United States.

“The brand needs an entry-level Jeep” that people can get at a lower price point, Mr. Marchionne said.

Chrysler was also close to finalizing plans to build Jeeps in China, he said.

Mr. Marchionne said it was important for Chrysler to expand its product lineup to help Fiat weather the European sales crisis, which is affecting most auto companies there.

He estimated that mass-market carmakers in Europe lost a combined 5 billion euros last year, mostly because demand fell well short of supply.

Automakers have so far announced a handful of plant closings to address the overcapacity issue. But Mr. Marchionne has consistently argued for a broader reduction in the number of factories throughout Europe.

“The gap is too large,” he said. “You can’t close a 5 billion euro gap in operating profit by tweaking the machine.”

Mr. Marchionne said that he was driving Chrysler to make up the difference in profits as Fiat falters and as comeback plans for Alfa Romeo take shape.

“We are living with the consequences of a collective inability to resolve the issue,” he said. “But this is not for the fainthearted.”

He said that overcoming the “threat of complacency” is Chrysler’s biggest issue. After the Ram pickup won the truck of the year award at the Detroit show, Mr. Marchionne cut short the celebratory mood at the company’s exhibit.

“Celebration is fine, I’m delighted,” he said. “But it’s over.”

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DealBook: CVC Capital Is Said to Have Cut Its Stake in Formula One

A Ferrari at the 2012 Formula One Grand Prix of Spain.Valdrin Xhemaj/European Pressphoto AgencyA Ferrari at the 2012 Formula One Grand Prix of Spain.

The private equity firm CVC Capital, which owns a controlling stake in the company Formula One, is not taking any chances before the racing company’s proposed $3 billion initial public offering.

Over the last five months, CVC has sold a 21 percent stake in Formula One to three investors for a combined $1.6 billion, according to a person with direct knowledge of the matter.

The combined deals, which value the company at over $7 billion, have reduced CVC Capital’s stake in Formula One to 42 percent, from 63 percent. The sale is part of the private equity firm’s effort to reduce its risk ahead of Formula One’s I.P.O., the details of which began to be presented to investors on Tuesday.

The buyers include Waddell Reed, a money manager based in Kansas, which paid $1.1 billion at the start of the year for a 13.9 percent stake in Formula One. The investment management firm BlackRock bought a 2.7 percent share in April for $196 million, the person added, who spoke on the condition of anonymity because he was not authorized to speak publicly about the sale.

Norges Bank Investment Management, the Norwegian sovereign wealth fund, bought a 4.2 percent stake from CVC Capital for $300 million.

The motor racing company, which has focused on Asia as a major growth area, intends to set the final pricing of its offering in mid-June and to have its shares begin to trade in Singapore a week later, according to another person with direct knowledge of the matter.

By selling stakes in Formula One to new investors, CVC Capital also hopes to build momentum for other potential buyers for the I.P.O., according to one of the people with direct knowledge of the matter.

Unlike other companies, Formula One has few similar publicly traded sports franchises that can be used to guide investors on the price of its stock offering.

Formula One employs 200 people and last year recorded revenue of 1.17 billion euros ($1.5 billion), according to a statement on CVC’s Web site. The racing teams will meet at the Monaco Grand Prix this week, which is the most important series race of the year for sponsors and for media exposure during the race weekend.

The lead underwriters on the deal are Morgan Stanley, UBS and Goldman Sachs. The Singaporean lender D.B.S., the C.I.M.B. Group of Malaysia and Banco Santander of Spain also are involved.

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DealBook: With Romney Under Attack, Private Equity Fights Back

Mitt Romney, left, with William W. Bain Jr. in 1990. Mr. Romney began his rise in business working for Mr. Bain, who encouraged him to move into the private equity firm that he ran for 15 years.Justine Schiavo/The Boston GlobeMitt Romney, left, with William W. Bain Jr. in 1990. Mr. Romney began his rise in business working for Mr. Bain, who encouraged him to move into the private equity firm that he ran for 15 years.

It was a long-held fear of Wall Street’s private equity titans. If Mitt Romney won the Republican nomination in 2012, the industry would come under intense scrutiny and withering attacks from his opponents.

As Mr. Romney has established himself as the front-runner in the large Republican field, those fears have come to fruition.

So the private equity titans are fighting back.

The industry’s lobbying group has hatched plans to counter the intensifying criticism of private equity’s business practices. In the coming weeks, the group, the Private Equity Growth Capital Council, will roll out an image campaign, according to two people with direct knowledge of the plans who requested anonymity because they were unauthorized to discuss them publicly.

Initiatives include online advertising that will promote the industry as one that creates jobs and expands companies. The council plans to reach out to political reporters and columnists in an attempt to disabuse them of what it views as gross misconceptions about private equity. It will also hire more people in the coming months, adding to its lean 10-person operation.

“There is a lot of misinformation being spread, purely for political purposes and on both sides of the aisle, as it pertains to private equity,” Steve Judge, the group’s interim president and chief executive officer, said in a statement issued on Monday. “While the business model has evolved over time, the fact of the matter is private equity provides capital and operational expertise to companies that are often underperforming or on the brink of failure.”

Those comments were in direct response to the stepped-up attacks against Mr. Romney’s business record this weekend.

Newt Gingrich said Bain Capital, the firm Mr. Romney ran, looted companies and left people unemployed. “When Mitt Romney Came to Town,” a soon-to-be released film backed by Mr. Gingrich’s political action committee, focuses on four soured Bain deals, including one where it laid off a hundred steel workers in South Carolina. A number of investigative articles in the media have also raised questions about Bain’s investment record while Mr. Romney ran the firm.

This is hardly the first time that the industry has come under assault. In 2007, the world’s largest firms, including Bain Capital, formed the private equity trade group at the peak of the buyout boom. Within months, the industry became a symbol of corporate greed and excess, in part a result of the lucrative initial public offering of the Blackstone Group and a fin de siècle 60th birthday party thrown by its chief executive, Stephen A. Schwarzman.

Stephen A. Schwarzman, the chief executive of the Blackstone Group.Michel Euler/Associated PressStephen A. Schwarzman, chief executive of the Blackstone Group.

Congress, as it began to explore ways to cut the deficit, also homed in on what it saw as tax advantages enjoyed by Mr. Schwarzman and his private equity peers.

The trade group, originally called the Private Equity Council, fought back on tax reform, and has continued to lobby aggressively against it. It has so far succeeded in holding off any tax increase on private equity executives, though Congress is expected to again raise the issue this year.

One of the council’s core aims is to rebut what it views as negative stereotypes about the industry, promoting an image of private equity practitioners as job creators who fix and expand companies. It publishes studies and white papers with titles like “Driving Growth: How Private Equity Investments Strengthen American Companies.”

On its Web site it seeks to disprove various “fictions.” For example: “Fiction: Private equity firms are ‘quick flip’ artists that buy companies and sell them to make a fast buck.” It then tries to debunk the statement: “It takes time to grow and strengthen companies so that they are worth more to future buyers.”

The council has evolved in recent years. Originally a group of the 11 largest buyout shops, like the Carlyle Group and Blackstone, it expanded its membership ranks in 2010 and changed its name to the Private Equity Growth Capital Council.

The council’s rebranding, and its recruitment of smaller firms, was an attempt to promote the industry as doing more than just classic private equity transactions — the risky leveraged buyouts in which large amounts of debt are used to acquire big companies in deals that sometimes end up in bankruptcy.

But the council has had growing pains. Its first chief executive, Douglas Lowenstein, resigned last summer and the group has not yet found a permanent successor.

Last year, Mr. Romney’s former firm, Bain Capital, dropped out of the council. Bain’s partners decided to leave because of dissatisfaction with the group’s direction and the belief that its annual dues of nearly $1 million a year could be better spent elsewhere, according to a person with direct knowledge of the firm’s thinking.

Mr. Romney’s candidacy, combined with Bain’s withdrawal, have complicated the council’s lobbying and advocacy efforts, said two people with direct knowledge of its work. Most of the recent criticism of the industry has been focused on Bain, but the council has resisted directly refuting those attacks. It wants to remain nonpartisan and not appear in any way to be supporting Mr. Romney’s candidacy.

A number of the country’s top private executives — Blackstone’s Hamilton E. James and TPG Capital’s David Bonderman, for example — are big Democratic donors.

The private-equity-is-evil narrative first emerged during the 1980s, when buyout executives began using large amounts of debt to buy companies. They were branded as “barbarians at the gate,” which was the title of a 1990 book about the takeover of RJR Nabisco by Kohlberg Kravis Roberts.

A year before, The Wall Street Journal published a Pulitzer Prize-winning article by Susan Faludi about the human toll of K.K.R.’s leveraged buyout of the grocery chain Safeway. The article opened with a laid-off Safeway truck driver shooting himself in the head.

In 1994, Mr. Romney learned firsthand the power of a negative attack on private equity. That year, he started his political career by running for the Senate and challenging Senator Edward M. Kennedy. He promoted his record of job creation and building businesses at Bain.

Mr. Kennedy turned the tables on Mr. Romney by focusing on American Pad Paper, or Ampad, a company that, under Bain’s ownership, shed factory jobs and cut wages. The Massachusetts senator played television ads featuring laid-off Ampad employees, even though those layoffs occurred after Mr. Romney left Bain.

Mr. Romney later acknowledged that he was unprepared for Mr. Kennedy’s private equity assault.

“He characterized me as a coldhearted, unfeeling robber baron,” Mr. Romney said at the time, in an interview with The Boston Globe.

With Mr. Romney in the spotlight on a national stage and facing a well-funded Obama re-election campaign, the industry’s top officials know that Mr. Romney’s opponents will continue to push the portrayal of Mr. Romney as a fat-cat job-destroying deal maker.

“We were bracing ourselves for this but we’re not even in the general election yet,” said a senior private equity executive who spoke on the condition of anonymity. “Expect more pain.”

This post has been revised to reflect the following correction:

Correction: January 10, 2012

The first name of Hamilton E. James, the Blackstone Group’s top executive, was misspelled in an earlier version of this article.

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