Editor’s note: Comments on this story have been temporarily disabled. No, not our story. The Detroit Free Press article revealing that “Chrysler is in the awkward position of paying about $30 million in retention bonuses to keep top executives while the company cuts thousands of jobs.” Yeah, don’t you hate it when that happens? The Freep immediately counters with the ameliorating fact (not) that “Chrysler owes the bonuses under its contracts with about 50 executives, based on a retention incentive plan crafted early last year by former German parent DaimlerChrysler, when it was preparing to sell the Chrysler unit.” Ohhhh, so that’s alright then. Well, not with Freep readers, who’ve jammed the e-switchboard. Either that or the Freep can’t delete the flamers fast enough. Or they simply don’t want to allow their readers to express their outrage, for reasons that we can only guess (cough advertising cough). Anyway, damage control! “Nancy Rae, Chrysler executive vice president for human resources and communications, said the move made sense at the time to ensure potential buyers that key Chrysler executives would remain in place after a sale. She acknowledged that the bonuses could be seen as controversial now.” Yeah, no shit. Anyway, let’s name some names, shall we?
“Documents obtained by the Free Press [you go girl!] show that at least six Chrysler executives are due to receive bonuses of more than $1 million apiece to stay through August 2009, the two-year anniversary mark of when private equity firm Cerberus Capital Management bought an 80.1% stake in Chrysler.
Those promised the largest retention bonuses:
• Frank Ewasyshyn, executive vice president, manufacturing, $1.89 million.
• Frank Klegon, executive vice president, product development, $1.8 million.
• Nancy Rae [yes, the same Rae that’s defending the payouts], $1.66 million.
• Simon Boag, president, Mopar/global service and parts, $1.65 million.
• Steven Landry, executive vice president, North American sales, $1.63 million.
• Michael Manley, executive vice president, international sales, marketing and business development, $1.53 million.
The bonus sizes ranged from a high of Ewasyshyn’s $1.89 million down to $200,000. The agreements provided for payments of 25% of the bonuses in February 2008 — which were made on schedule — and for the remaining 75% to be paid in August 2009.” [thanks to AUTOEMPLOYEEFORNOW for the link]
Incredible story in light of the present dire situation in the auto industry. Seriously, where will these guys go if they try to jump ship now? Is there really a big demand for execs that know how to destroy shareholder value?
The one positive thing for these guys, and surprising to me, is that out of the thousands of folks that have lost their jobs in Detroit, none of them have decided to take matters into their own hands and go postal on the Bonus crowd.
Chrysler probably won’t be around long enough to pay out the August 2009 bonuses anyways, so no biggie.
What is Jim Press raking in these days?
Typical, disgraceful American corpocracy! The reality is that some of these people should be deep-sixed as they don’t seem to be putting the interests of Chrysler and its survival first. If they don’t want to be there for the sake of what they are supposed to be doing, they should just leave.
“the move made sense at the time to ensure potential buyers that key Chrysler executives would remain in place after a sale.”
And that’s supposed to help a sale?
“Frank Klegon, Executive Vice-President for Product Development: $1.8 million”
And in the past year, he’s done exactly what to earn that?!
AIG execs are getting 500M bonus. with a 500B bailout. It is morally wrong, to ask for tax payer dollars and pay monster bonuses to the execs.
Sorry, I meant 150B bailout.
This won’t bode well for their bailout chances… or any public or UAW sympathy. Chrysler may die from the public burning them at the stake…
Monday morning quarterbacking aside, Cerberus was scared sh*tless that those who knew? what was going on would leave and Cerberus would be left without help to move along. Seems like it didn’t matter anyway as those executives that stayed couldn’t help the sinking ship. At least they got the cash. Good for them. They deserve all they have received ………. NOT!!
seoultrain :
November 14th, 2008 at 11:34 am
“the move made sense at the time to ensure potential buyers that key Chrysler executives would remain in place after a sale.”
And that’s supposed to help a sale?
Yes, in fact this is standard in M&A deals. The buyer wants to ensure that the Executives do not jump ship for some time. Very often already the Seller makes the contracts to ensure people stay on during the sales negotiations as otherwise they might fear to be fired right after the sale. This is quite a complex issue for sellers and buyers in M&A deals.
Whether these bonuses fit now into reality once a bailout would come is obviously another matter.
@Matt51,
Wrong on both counts: it is 700B bailout on books. The first installment is 250b.
When times are good, the execs get performance bonuses and lay off worker bees in the name of being competitive (then give themselves a cost reduction bonus for doing so). When times are bad, the execs demand retention bonuses to keep them at their desks, and lay off worker bees in the name of survival (then give themselves cheap stock options in hopes of a cyclical turn around).
Hate Detroit? No. Hate the culture of modern American Executive Management … you betcha.
Wanna talk about redistribution of wealth? Shhh, don’t bring it up, the executive ranks have that one nailed … take from the middle and give to the top … just don’t call it a tax!
Y’all are doin a heck of a job. Here – take this huge check and a life vest.
Since Chrysler is not publicly traded, I really don’t care what they pay their folks, but if/when they get a taxpayer funded bailout/loan/stay of execution, those retention bonuses need to go buh-bye.
autonut, I was referring to the AIG bailout, which is 150B.
US firms tend to provide much higher executive compensation packages than European and Japanese companies. That might be plausibly justifiable if performance was that much greater. At this late date can anyone make that argument with a straight face?
What we have here is the Era of Good Stealing. It’s greed unhinged from any semblance of services effectively rendered. Or, to be more blunt, it’s legalized graft.
Of course, this is nothing new. The US has gone through a number of corruption waves over the course of its industrialization. Each corruption wave has led to increased regulations. I think one can make a strong argument that many of the current problems with the finance industry are a result of (bipartisan) deregulatory efforts over the last decade — which effectively unraveled Depression era laws that kept the finance industry pretty darn stable for three quarters of a century.
They were promised the money for staying onboard following the Cerberus deal. Last time I checked, that deal went through. It’s a contract, and they’re obligated to fulfill it.
The package was negotiated in good faith when Count Daimlercula dropped Chrysler’s rotting corpse on Cerberus. This is not something that was negotiated last week. I don’t like it but it’s done. Let them get paid. But going forward if they simply give out future bonus money for the hell of it with no comensurant performance goals met, then yea, we should be upset. If the gubment gives them money, then they should have a say so in exec pay AND bonuses.
Repugnant.
“The Recession is a Crock of Shit” according to these guys.
I mean, I can get why they’d need to create incentives to these guys so they don’t say “forget this mess, I’m outta here” but at the same time these are the dudes who caused the mess. Its not like they’re going to get jobs someplace else after the debacle they caused.
This to me sounds more like another case of American executives raising their own pay than retention bonuses.
“It’s a contract, and they’re obligated to fulfill it.”
These executives want the US taxpayers to throw them a lifeline, so why not VOLUNTARILY give up their bonuses? A contract can be negated by the agreement of both parties. What, the executives never once thought of giving back anything? They demand that suppliers and employees do it, so why not them?
Where the bleep is the leadership by example? Does anyone in corporate America know Jack about leadership anymore?
Too bad Chrysler isn’t public any more. It would make more sense to pay these bonuses in stock options.
I’m with Dr Lemming. WTF should US execs get paid so much more is beyond me. And if payment is supposed to be tied to performance…
**SIGH**
Strange world. That’s what we get into when we start lionizing types like Jack Welch and such.
Just a thought
PS If the US gov does take over Chrysler an honors these payments, if I were a US citizen, I’d be mighty pissed!