Now the question is whether Feinberg can turn the battered auto manufacturer around or whether this might finally be the deal that gets the best of him. In an industry of damaged companies, Chrysler is almost a total wreck: It has sunk to fourth place in North America, the market on which—unlike its competitors—it is almost entirely dependent. Nearly 75 percent of its business comes from sales of increasingly less popular light trucks, such as the four-wheel-drive Jeep Grand Cherokee, which was ranked by the Environmental Protection Agency last year as the least-fuel-efficient S.U.V.—an impressive distinction. Chrysler controls less than 10 percent of the hot market for crossover utility vehicles. And it owes its retiree medical plan more than $17.5 billion. The day after Zetsche announced the sale, the company revealed that in the first quarter of 2007, Chrysler’s revenue had dropped 11 percent compared with the same period the previous year, and it had swung from an $857 million operating profit to a $2 billion loss. “There’s no economic justification for Chrysler Corp. to exist,” says Gerald Meyers, the former C.E.O. of American Motors and a professor at the University of Michigan’s Ross School of Business. “Whatever they can do, someone else can do better.”

Feinberg won’t be able to escape the spotlight as he tries to save Chrysler. This will be his riskiest, most public buyout. Even before the deal closed, it sent the market careening. Hedge funds and other investors, who for so long had a seemingly unlimited appetite for risky corporate debt, suddenly backed away from the table. In late July, they refused to buy $20 billion in Chrysler debt—just under a third of the total value of the loans Cerberus is taking out to fund the automaker’s ­operations—at the interest rates and under the conditions that Cerberus wanted. Its bankers (including J.P. Morgan Chase, Goldman Sachs, and Citigroup) were left on the hook, having committed to financing the deal. They were able to place $8 billion of the debt, only at higher interest rates and with tougher terms. And they were forced to sit on another $10 billion, which they hope to sell later. Cerberus and Daimler agreed to assume the remaining $2 billion.

If it had gone through, the debt offering would have been the largest of the year. When it didn’t, it became the biggest warning sign that the buyout boom might have ended. “The risk is being transferred to the banks,” says Brian Horey, president of the hedge fund Aurelian Management. “Eventually, the banks will choke on the stuff, and the whole leveraged loan market will grind to a halt.”

The concern was never whether the deal would go through. But how will banks react if they’re stuck with tens of billions of dollars of Feinberg’s debt? The answer to that could affect Cerberus for years. “Cerberus is not really staking its financial health on turning Chrysler around,” says another hedge fund manager. “It’s that its reputation is at risk.”

Feinberg is also being monitored by Washington, with Congress eager to see what he is going to do with—or to—Chrysler’s nearly 80,000 workers, most of whose jobs are in the political-battleground states of Michigan and Ohio. In the past few months, in the wake of Stephen Schwarzman’s $449 million payday from taking the Blackstone Group public, Congress has found private equity to be a crowd-­pleasing punching bag. Should Feinberg decide to order massive layoffs or gut Chrysler, his peers worry that the fallout from Washington would be swift and merciless. “We’re in a very populist era,” says Wilbur Ross, whose eponymous private equity firm has invested heavily in the auto world since 2005. “You become an easy target with any kind of successful thing. But you become an especially easy target when there are labor cuts and then you turn out to make a lot of money. It feels to people like you’re doing it off the back of the worker.”

Feinberg doesn’t need his peers to like him; it’s not as if he’s out socializing with them. “Regulator scrutiny is going to grow big,” he tells the Waldorf crowd. “Private equity firms will start getting accused of things unfairly. We have to keep a thick skin.”

Putting his words into action, two days after closing the deal, Feinberg tapped a controversial outsider, Robert Nardelli, to be C.E.O. of Chrysler. During his stormy tenure at Home Depot, Nardelli alienated stockholders, executives, and employees with an imperious attitude and a massive pay and severance package. He may be the last executive in America you’d appoint if you were concerned about perception instead of performance.

But then, Feinberg is not trying to win a popularity contest. “Carl Icahn works through the public media when he’s doing deals,” says a former Cerberus executive. “Other guys want that same attention. Steve Feinberg doesn’t. He has a very clear scorecard. And he’s winning.”

Stephen Feinberg currently sits on top of a collection of companies that employs roughly 250,000 people and generates annual revenue of more than $120 bil­lion. If you added them all up, they would form the ninth-largest business in the U.S., with sales greater than those of Pfizer, Microsoft, and United Airlines combined. Feinberg runs multiple private equity and hedge funds under the Cerberus umbrella, and these have produced outsize returns, consistently beating the performance of rival funds.

Feinberg never set out to be a corporate titan. While building Cerberus in the early 1990s, he focused on buying debt in economically distressed firms and then negotiating his way into control. The work took place largely behind the scenes: having one-on-one discussions with executives and lawyers, maneuvering creatively in bankruptcy courts, and seeking out partners to merge with or to sell to—all to trigger a big payday. But he kept his eyes open for new ways to make money. After the recession and corporate bankruptcies following 9/11, banks began to clamp down on their lending. Feinberg jumped in to fill the void, dramatically expanding his loan operations. (His stand-alone banking division, called Ableco, as of this spring had $2.5 billion in available capital.) As hedge funds began competing in the area, Feinberg migrated into private equity, looking for companies he could restructure and run.

But squeezing money out of firms that weren’t in distress required different skills. Feinberg went out and bought them. He hired 150 C.E.O.’s and other top executives to form an active brain trust—paying them, according to a competitor, around $500,000 a year—to field calls from Cerberus employees, find and weigh in on deals, and open up their Rolodexes. But the big payday for these executives comes if Feinberg places them inside a company and they are given a large equity stake, often for the first time in their career. Other private equity firms have tried something similar, but not on this scale. In the past year and a half alone, Feinberg has brought on more than 60 new executives, from the former C.E.O. of the massive British insurance company Prudential to the former chief financial officer at Bank of America. “None of these top guys are working for their salary,” says Tim Price, a managing director at Cerberus. “They’re working because they’re driven to make a difference. They’re highly skilled, and they want the intellectual stimulation. They feel like they’re fighting on the side of the angels.”

Once they’re full-time, Feinberg, who is typically one of the first to come into Cerberus’ Park Avenue office and one of the last to leave, expects these onetime big shots to put in just as much effort as he does. “No one at the office goes out to lunch,” says one employee. William Richter, the firm’s co-founder, puts it this way to investors at the annual meeting: “We still have the intensity that Steve Feinberg had on his first day, and that is passed down through the organization. Anyone who loses sight of it is quickly reminded.”