Kenneth Feinberg, the Treasury Department's special master on compensation, said that Chrysler Financial will be winding down its business by the end of 2011. Ever since the government appointed GMAC Financial Services as Chrysler Group's captive finance company, Chrysler Financial had been downsizing.
The lending company received a total of $1.5 billion in federal loans from the time that Chrysler had filed for bankruptcy on April 30. In a letter granting his approval to Chrysler's proposed pay structure, Feinberg said that since the company is heading towards liquidation, its employees are justified to receive more pay. Notably, Chrysler Financial is the only company among many under Feinberg's review whose pay recommendations the czar accepted and did not revise downward.
Feinberg further said in the letter that Chrysler Financial's "success in the wind-down of operations and repayment of lenders and investors is largely dependent upon maintaining critical talent." Feinberg said that he is approving the proposal to minimize the risk of employee departures. Chrysler Financial has publicly stated that it plans to wind down its operations and because of this, will have difficulty attracting new employees.
Cash salaries must compensate since the company will cease operations after 2011 and so its employees will not be able to receive stock awards. Chrysler Financial's top employee will get $1.5 million in cash in 2009 while two other executives will make $1.4 million and $800,000 in cash.
The other 19 top-paid employees whose compensation falls under Feinberg's reach will draw between $176,000 and $600,000 in 2009 salary. The cash pay of the top-paid employees whose compensation Feinberg approved will drop 30 percent from last year. Total compensation also will decrease 56 percent.
Chrysler Financial has not made any announcements with regards to this development, saying that its employees were reviewing the details of Feinberg's ruling.
Chrysler Financial is majority owned by Cerberus Capital Management, the private equity firm that formerly owned 80.1 percent of Chrysler's automotive business. According to the Detroit News, executives at Cerberus didn't know the Treasury Department had directed Chrysler Financial to liquidate and that they hadn't planned to close the lender.