George S. May Business Blog

Chrysler turns down further government funding as executives refuse to limit their own pay

A report from the special inspector general’s office overseeing the use of rescue funds given to Detroit automakers, came out today revealing that Chrysler Financial was unable to get additional funding from the federal government when at least some of its top 25 executives refused to sign waivers releasing the Treasury Department and the company from legal responsibility for placing strict limits on executive compensation.

The report by the office also indicated that General Motors Corp is expected to receive another $5 billion from Treasury in the 60-day extension granted it by President Barack Obama and Chrysler another $500 million as it attempts to find a partner as required by the White House.

An administration official said those preliminary loan targets were provided by the inspector general’s office at the end of March and that the actual loan amounts have yet to be determined.

The Treasury Department also is spending up to $1.25 billion to guarantee the warranties on GM and Chrysler vehicles sold on or after March 30, 2009.

Both companies are looking at serious deadlines over the next few months. Chrysler has until May 1 to finalize a deal with Fiat and GM has until June 1 to come up with a new restructuring plan and concessions from stakeholders.

The inspector general’s report revealed that after Chrysler received $1.5 billion in TARP funds, it requested additional funding. Treasury officials then agreed to look into getting the company more funds but mandated that before they could receive any cash, Chrysler would have to have its top 25 executives sign waivers that put strict limits on what they could be paid. The report said Chrysler Financial management was “unable to obtain waivers from all 25 executives, therefore the request for additional funding was denied.”

A senior industry official with knowledge of the matter said Chrysler Financial turned down the new government loan because, with auto sales down in April, there has been even less need for financing, the industry official said.

The official said that if sales picked up, Chrysler Financial may seek additional government aid, even if it means agreeing to executive compensation limits.

“If Chrysler Financial needs the cash to support Chrysler, they [the executives] are not going to put the auto company at risk,” the senior industry official said. “These guys aren’t going to blow up the car company for their personal reasons . . . they’ve done everything they can to support the automotive company.”

Related posts:

1. Fed turns down Geithner’s request for public review Keep your eye on this one. It is highly unlikely that this story will be going away any time soon.  (Bloomberg) — “The Federal Reserve Board has...


2. Seeking Alpha pulls in $7 million in their second round of funding Financial information and analysis website, Seeking Alpha, has managed to raise $7 million in their second round of funding, PaidContent reports. The leading investor was...


3. AIG exec quits over government enforced pay restriction An AIG executive has reportedly quit due to the government’s limit on executive pay. AIG said yesterday that Anastasia Kelly, vice chairman and general counsel, is...