Hourly Employees Spared Painful Benefits Cuts in Chrysler Bankruptcy
Chrysler CEO Robert Nardelli made the announcement in a memo sent to employees shortly after the company filed for bankruptcy protection Thursday. The company assured workers that the structured, U.S. Treasury directed, bankruptcy is anticipated to last 30 to 60 days. The bankruptcy will produce a new company that will be part of Italian automaker Fiat, which agreed to a strategic alliance Thursday, April 30.
During that time, most manufacturing will be idled effective Monday, May 4. Union employees will still receive company-sponsored health care. Nardelli said “all qualified employee” pension and 401(k) funds would be protected from Chrysler’s creditors.
Based on agreements ratified before the bankruptcy filing, the United Auto Workers agreed to labor concessions in return for giving the union’s retiree health care trust a 55 percent equity stake in the newly formed automaker. The UAW represents about 26,800 Chrysler workers in the United States.
Fiat will own 20 percent and the U.S. and Canadian governments will own 10 percent, according to a company press release.
The bankruptcy will do little for the company’s network of 3,200 dealerships, many of which are likely to close as a result of the bankruptcy.
Nardelli also told employees that he would step down as chief executive after the company emerged from bankruptcy to become an advisor to Cerberus Capital Management, the private equity firm that bought a controlling stake in the car maker in 2007 and later relinquished ownership as part of the government’s bailout.
“With the U.S. government approval of our viability plan and the completion of an agreement in principle for the alliance, this is an appropriate time to let others take the lead in transformation of Chrysler with Fiat,” Nardelli said.
Chrysler has shed almost 40 percent of its workforce over the past two years, to 54,000 workers as of January 1 from nearly 87,000. The company expects to trim 3,000 more workers by the end of the year, a spokesman said.