Monday, February 02, 2009

Breaking News:
Chrysler to Offer Buyouts to All Hourly Employees

This was just posted on CNN Money:

According to a letter from a United Auto Workers executive to union members, Chrysler is offering up to $50,000 to virtually all of its 27,000 U.S. hourly workers, along with a voucher good for up to $25,000 on the purchase of a vehicle.

Workers eligible for immediate retirement working at plants on the closing list could receive up to $115,000 and the $25,000 car voucher.

If all of the workers took the $50,000 (forget about the car), that would be a $1.35 billion cash outlay. That's money that Chrysler almost certainly doesn't have. The buyout offer is set to last through February 25, but 8 days before that, February 17, 2009, Chrysler is due to submit to the government its plan for viability. Chrysler must submit to the treasury department a financial plan showing that the company is viable and has a positive "net present value". Translated into English, that means they must show that at least under some not incredible scenario, the company could pay back whatever money they ask the government to put into the firm. If Chrysler can't produce a viability plan, the government has the right to call the loan they gave Chrysler in December, an action that would likely trigger an immediate bankruptcy.

Where will the money come from to buy out the workers? Presumably, it will come from a new installment of government cash. The request for that money could be a key provision in the "plan" Chrysler will file in a couple weeks. Good luck getting a plan like that past Congress. Each congressperson has thousands of constituents getting laid off every week, and usually with little or no severance. These workers don't want to subsidize parting gifts to UAW workers.

Assuming this plan goes into effect what type of benefits will the workers receive who accept the buyouts? It hasn't been mentioned. When I find out, I'll post.

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