Former GM CEO Rick Wagoner has a $22 million pension agreement. He also is owed a $68,900 annual pension that is likely to be honored by GM and the bankruptcy court. (Brandy Baker / The Detroit News)
Washington -- The bankruptcy filings of General Motors Corp. and Chrysler LLC will likely cost former and current top executives including Rick Wagoner, Robert Lutz and Lee Iacocca big money.
Wagoner, fired by President Barack Obama more than two months ago as GM chairman and CEO, remains on the payroll.
But it's not his $1 salary for 2009 that's in dispute.
It's Wagoner's $22 million pension agreement, which now will be decided after the company emerges from bankruptcy. GM's board of directors and the auto task force have been reviewing the matter, but the board didn't take action before GM filed for bankruptcy Monday. The financial issue is the only snag that is keeping Wagoner on the payroll.
The deposed GM boss, like a number of former senior execs, is likely to lose some of his pension.
Chrysler cuts under way
Chrysler is leaving some of its former executive pensions behind, in bankruptcy. But GM didn't follow suit. GM spokeswoman Julie Gibson said Tuesday the pensions for former execs -- known as supplemental employee retirement plans -- will be brought to the new company emerging from bankruptcy.
GM said in a statement that "the amount of non-qualified pension for some executive retirees may be affected."
Gibson said benefits won't be reduced until GM emerges from bankruptcy.
Last Thursday, Chrysler CEO Robert Nardelli confirmed that former Chrysler Corp. CEO Lee Iacocca was losing a company car and his supplemental executive pension. Just how much wasn't made public, because Chrysler is privately held.
Lutz, a legendary auto figure who is retiring as GM vice chairman this year, is a former president and CEO of Chrysler; he also worked at Ford Motor Co. and BMW AG. Reached by e-mail, Lutz confirmed that his Chrysler pension had been reduced, but he declined to elaborate.
The firm sent letters to several former executives telling them to turn in their company vehicles.
In a May 14 letter, Chrysler told former executives and directors with company-provided vehicles that they'd have to turn them in, or buy them at fair market value by May 31.
"In light of the many contributions you have made to Chrysler over the years, we regret the need to take this difficult action," Chrysler wrote.
Other former top execs at Chrysler also have lost supplemental pensions.
Wagoner, 56, a 32-year veteran of GM, had a pension with total accrued benefits of $22.1 million as of Dec. 31. The pension is to be paid in five annual pension payments of $4,523,400, with the first monthly installment due upon his retirement. Wagoner could have collected about $900,000, if he had retired immediately.
Wagoner also is owed a $68,900 annual pension that is likely to be honored by GM and the bankruptcy court.
The $22 million owed Wagoner is in addition to about $535,000 in deferred compensation -- a portion of his income that he agreed to be paid at a date after which it was earned. Wagoner's deferred compensation account was worth $766,000 at the end of 2007 but has fallen along with GM's stock value. The deferred compensation could be lost in bankruptcy.
Some executives sold off most or all of their GM stock in anticipation of the bankruptcy filings.
It's unclear what, if anything, GM will make public about the payments since the company will be privately held after it clears bankruptcy.
GM has dealt with other pension issues and faces a $20 billion shortfall, according to the Pension Benefit Guaranty Corp. GM, using different accounting rules, estimates its shortfall at about $12 billion and says it expects to need to make $6 billion pension payments in 2013 and 2014 to make up the difference.
Wagoner's compensation has totaled about $65 million since 2003, including $40.2 million over the past three years.
GM noted that because the precipitous drop in the company's stock price, the stock and options the automaker awarded to Wagoner declined dramatically: For the $11.9 million in stock and options awarded to Wagoner in recent years, GM said the actual value as of Dec. 31 is $682,000.
Wagoner became CEO in 2000 and added the title of chairman of the board in 2003.
Bankruptcy already stings
Bankruptcy already has stung Chrysler execs.
About 1,200 Chrysler retirees who received large pensions under the company's Supplemental Employee Retirement Program got their checks cut off after the April 30 bankruptcy filing.
They're lumped in with more than 100,000 other unsecured creditors to whom Chrysler owes money. The bankruptcy court will determine how much, if anything, they will receive.
Chrysler also said in court papers it wouldn't honor "retiree benefits or severance arrangements provided under certain individual agreements, American Motor Co. employment agreements, retired officer benefit arrangements and retired board of director benefit arrangements." Chrysler purchased American Motor Co. in 1987.
For some former senior execs, Chrysler said, there are "contractual retiree health care benefits that will nevertheless not be assumed by" the new company.