Posted by: David Welch on March 15, 2006
Is Chrysler taking a cue from its old CFO? On March 15, Chrysler Group said the company would cut salaried-employee and retiree health care benefits, with top execs taking the biggest hit. Chrysler Group CEO Tom LaSorda wanted an equitable solution to cutting health care costs, which are expected to jump 8.5% this year to $2.3 billion at Chrysler. That sounds a lot like the “equity of sacrifice” that former Chrysler Corp. CFO and now General Motors board member Jerome B. York prescribed for that company in January.
Alas, Chrysler says York’s advice for GM had nothing to do with its execs making the biggest contributions to their medical benefits. It looks like a legit explanation. They cited a study from Mercer Human Resources Consulting that says 6% of Midwestern companies and 12% of U.S. manufacturing firms are making similar moves. In this case, top executives like LaSorda will pay 100% of their medical insurance premium. The average Chrysler exec will pay $1,500 more toward health care coverage on top of the $3,000 in costs they pay now. Mid-level managers will pay an average increase of $450 a year. Administrative staffers won’t suffer an increase when the action takes effect in 2007.
Chrysler did, however, offer one new spiff to its employees and retirees. Some who weren’t eligible to get company cars can now lease them at low rates—1.4% to 1.6%—and they can get up to two cars at a time. Chrysler says the move will improve morale even as the company does some belt tightening. There’s another benefit: Leasing cars to employees and retirees will give Chrysler a way to purge a few thousand cars worth of excess inventory that the company has sitting on lots around the Detroit area.