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May 12, 2009

Chrysler, Fiat planning to avoid cap on exec pay

The new Chrysler-Fiat partnership will get around U.S. restrictions on executive pay by having its top officers deemed Fiat employees. Meanwhile, Chrysler continues trying to reach its goal of reducing 3,500 U.S. hourly jobs through buyouts.

The details were disclosed in documents that Chrysler filed today as part of its bankruptcy case, outlining the $10.1 billion transaction among Fiat, the U.S. and Canadian governments and the UAW.

The new Chrysler is among the first company to fall under rules outlined in February by U.S. Treasury Secretary Tim Geithner for companies getting “extraordinary assistance” from the Treasury. Geithner had said such firms must cap the compensation of its top executive at $500,000 excluding restricted shares of stock, but the final rules putting the limits in place have not been released.

Treasury’s agreement with Chrysler for $4.1 billion in loans to survive bankruptcy specifies that the company’s top 25 senior executives will face pay limits, and the executives must agree to waive any claims against the government for changes in their compensation.

Fiat Chief Executive Sergio Marchionne has already indicated he will replace Chrysler Chief Executive Bob Nardelli. But under the deal, any of Chrysler’s top officers can be deemed a Fiat employee who’s “seconded” to Chrysler, and therefore take pay from Fiat beyond any Treasury cap.

Marchionne’s total compensation for fiscal 2008 was 3.05 million euros (about $4 million), according to a McGraw-Hill profile.

The push for 3,500 buyouts from Chrysler’s 26,000 UAW workers was apparently set by the Obama auto industry task force, according to documents detailing the changes in the UAW contract.

Chrysler, which has not publicly said how many workers it wants to buy out, extended the deadline for the deal last month to May 25, the third time it had been pushed back.

The buyout provides $75,000 and a $25,000 voucher for a new Chrysler vehicle for those under 55 with at least one year of seniority. Those between 55 and 62 with at least 10 years of service can retire with full pension benefits.

LINK:Chrysler, Fiat planning to avoid cap on exec pay | | Detroit Free Press
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