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May 5, 2009

Next Chrysler CEO faces pay cap

NEW YORK -- Whoever replaces Chrysler Chairman and Chief Executive Bob Nardelli will have to oversee a complex rebuilding of Chrysler with Fiat engineering and U.S. government money – and might not earn more than $500,000 a year doing so.

That’s because the U.S. government’s $8.08 billion in aid to Chrysler for its bankruptcy and recovery would appear to be one of the first moves to fall under the Treasury’s tougher rules for executive compensation at companies receiving “extraordinary assistance" under the $700-billion financial industry bailout.

The rules as outlined in February by Treasury Secretary Tim Geithner would cap the compensation of Nardelli's replacement at $500,000 excluding restricted shares of stock. Such stock would become available only once Chrysler pays back its government loans.

Since the government expects Chrysler will be privately held for several years among Fiat, the UAW retiree health-care trust fund, and the U.S. and Canadian governments, it’s not clear there would be any shares available for executive compensation.

Nardelli has said he will leave the company once Chrysler emerges from bankruptcy in 60 days or less. He told Congress last year that he was earning $1 a year as chairman of Chrysler, his first chief executive job after coming under fire for being paid $210 million when he left Home Depot.

It won’t be just the new chief executive at Chrysler who faces restrictions on compensation. Under Treasury’s agreement with Chrysler for $4.5 billion in loans to survive bankruptcy, the company’s top 25 senior executives will face pay limits, and must agree to waive any claims against the government for changes in their compensation.

Treasury has yet to produce the detailed rules that would put the limits Geithner announced in February into place. An administration official said Treasury would soon outline the regulations on executive pay.

It’s also unclear how the rules might apply if Nardelli’s replacement is already being paid for a second job -- say, if Fiat Chief Executive Sergio Marchionne took the post.

But when Fiat starts swapping technology and engineering with Chrysler, it will have to pay its own airfare for any Turin-to-Auburn Hills flights. The government’s $4.5-billion loan also bars the automaker from owning or leasing any private jets.

LINK:Next Chrysler CEO faces pay cap | | Detroit Free Press
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