When all is said and done, car buyers -- and owners -- won't be the only ones affected by Chrysler's 2009 bankruptcy and reorganization. The company's financial woes are also proving troublesome for its former employees -- and they aren't happy about it.
In a class action lawsuit filed this week, around 450 Chrysler retirees claim they lost over $100 million in pension payments as a result of the way the bankruptcy was structured. According to the lawsuit, Daimler AG and Cerberus -- Chrysler's former owners -- failed to transfer the pensions to New Chrysler, the company that emerged after the bankruptcy.
Among the plaintiffs is former Chrysler CEO Lee Iacocca, who ironically steered the company away from what looked like inevitable bankruptcy in the late 1970s.
According to the suit, Daimler converted current executives' pensions into annuities back in 2005, when the company began experiencing financial problems. For reasons unexplained, the company failed to do the same with former employees' pensions.
The suit also contends that Cerberus, which bought Chrysler from Daimler in 2007, failed to protect the pension fund from creditors before the bankruptcy -- or perhaps converted the funds itself.
Sheldon Miller, an attorney for the plaintiffs, said in a statement that the shortfall has caused the executives to make drastic changes to their retirement plans at a time when they can't go out and find other jobs to supplement their incomes.
Miller said there are no plans for an additional suit against New Chrysler.
Everybody involved in this suit loves that company and like everybody else wants to see it succeed, Miller said. The plaintiffs in our case are trying to assure that there won't be similar hardships for Chrysler's current employees, many of whom worked for and with the people involved in this suit.
Chrysler has seen more than its share of turmoil over the past decade or so. In 1998, the company was purchased by Daimler-Benz AG, the longtime Mercedes manufacturer. In 2007, Daimler sold 80 percent of the company to Cerbeus, a private equity firm that counts among its leadership former Vice President Dan Quayle and former Treasury Secretary John Snow. Cerbeus gave up its equity stake less than two years later, when Chrysler declared bankruptcy and transferred most of its assets to New Chrysler. Fiat, the Italian automaker, currently has a 20 percent stake in New Chrysler.
