Despite the fact that Chrysler LLC is shedding jobs and drastically cutting spending in order to stay afloat, a new report today reveals that the automaker is paying out incentives to 50 of its top executives. The retention bonuses are part of an incentive plan crafted last year by DaimlerChrysler when the automaker was selling Chrysler to Cerberus Capital Management LC.
At the time, the bonuses were designed to keep Chrysler executives on board when the company was being transferred to the private equity firm. These retention programs are common practice when a company becomes private as it helps ensure potential buyers that key executives won’t rush away from the company, says the Detroit Free Press.
At least six Chrysler executives are promised $1 million or more bonuses if they stay with the company through August 2009, the newspaper says. The other 44 bonuses are still worth more than $200,000 at the minimum.
The initial agreement said that 25 percent of the bonus would be paid in February 2008 and the remaining 75 percent would be paid out next August. This comes at a time when Chrysler is shedding jobs left and right to keep its costs down. The automaker has announced nearly 35,000 job cuts since February of 2007.
The controversial bonuses have met mixed reaction from analysts.
John Challenger of Challenger, Gray and Christmas of Chicago, a human resources consulting firm, said, “To get good people, the right people, then you often have to pay retention bonuses – otherwise they just won’t come or they won’t stay.”
Still, the United States government, particularly House Speaker Nancy Pelosi, has vowed to prevent big bonuses to executives as a condition of federal aid. The automakers are seeking for the $700 billion U.S. government bailout of troubled financial firms to be changed to cover the auto industry.
