S. Treasury Loan Agreement Department. .
Management Concessions .
Chrysler suspended its 401(k) match, performance bonuses, merit increases, and eliminated retiree life insurance benefits.
As part of the restructure Chrysler suspended the 401(k) match which is offered by most companies as part of their employee retirement plan. When a match is eliminated, an employee effectively takes a 3 percent pay cut. For a worker earning $50,000 annually, that's $1,500. Approximately 218 companies suspended their 401(k) match between January 2008 and November 2009, according to a new analysis by the Center for Retirement Research at Boston College. The majority of employers slimmed their match between December 2008 and May 2009, with the peak occurring in February 2009. The companies that suspended their 401(k) contributions generally did so due to a lack of liquidity that rendered them unable to continue their previous contributions, suggests the study of 127 employers with newly suspended contributions and 1,734 non-suspenders. 401(k) match suspensions during the 2001 recession were temporary and hopefully this will also lead Chrysler to do the same. This suspension allowed Chrysler to reallocate these funds into employee health care. This is something which could have been negotiated years before to reduce costs to the company but also be an innovator to change the culture of retirement systems.
Union Concessions.
The term "sheets for labor" and VEBA modifications will make Chrysler's cost structure competitive with foreign automakers' U.S. plants. However, the VEBA modifications are conditioned on further due diligence and satisfactory debt restructuring.
CEO Sergio Marchionne has brought a representative of the United Auto Workers Union onto the Chrysler Group LLC board of directors.
The appointment of the UAW's Eric Perkins comes at the request of a trust fund set up to cover the health care costs of retired unionized workers.