Chrysler’s bankruptcy is affecting more than just labor
By Susan Wilson
Bankruptcy seems to affect the little guy more than the big wigs. Donald Trump has filed for bankruptcy on several occasions and never seems to lose a dime while average Joes lose their homes. Chrysler’s bankruptcy is being felt by former executives including Lee Iococca, Chrysler’s savior in the 1980s.
So many executives of falling companies seem to survive on golden parachutes leaving lowly workers to pay the price in lower wages and lost jobs. Not this time.
Reuters has reported that former executives at Chrysler will be losing their life-long company car and much of their pensions. The most famous retired executive is Lee Iococca who kept Chrysler out of bankruptcy by asking for and receiving a $1.5 billion government loan in 1979. He was also CEO of the company when the first minivans were released by Chrysler.
Mr. Iococca and other former executives will lose their free rides. The executives have been asked to return their cars or arrange to pay for them. Poor guys.
All of those like Iococca who participated in a supplemental executive retirement plan are set to lose their retirement. This plan is considered an unsecured debt and is paid only after secured debts are paid in full.
An example of a secured debt is your car. If you don’t pay the loan, the loan company takes back your car and sells it. An unsecured debt is a general business loan where if you can’t pay it off, the loan company can’t just come in and take over your business. The loan company has to wait until other debts are paid and then it might see some money.
The upshot of this confusing scenario is that Lee Iococca and others will probably never see another dime from this pension plan since secured debts aren’t expected to be paid in full. Hopefully they have invested their pensions wisely, whatever wisely means these days.
Just like everyone else suffering from this down economy, former Chrysler executives will have to make due with less.
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Stumble It!
June 2nd, 2009
It’s been widely discussed that workers at the big 3 auto makers had generous pension plans, and good wages, but it looks like it was the management that really had their snouts in the trough. Maybe that was justified when Ford, GM and Chrysler were the top auto makers in the world (the 1950s and 1960s), but you would have thought that reality would have caught up with auto industry a long time ago. It’s a shame it took a recession to bring these guys to Earth.