Watch CBSN Live

Merger Bonanza For Chrysler Execs

Top Chrysler Corp. executive would gain millions from the automaker's proposed merger with Daimler-Benz AG.

Chairman Robert J. Eaton would get cash and stock worth an estimated $69.9 million. And if DaimlerChrysler stock rises after the merger, he'd collect the gains on 2.3 million shares.

Eaton, who also is chief executive and would be co-chairman of the new DaimlerChrysler AG, would receive a cash payment of $3.7 million and 628,277 DaimlerChrysler shares worth $66.2 million. The stock is compensation for his unvested Chrysler stock options and performance-related shares.

The merger forces Chrysler to cash out its executive stock options early. To compensate for the loss of the potential gain they could have realized if they kept those options, the top executives would get so-called stock appreciation rights to new DaimlerChrysler shares.

"It's like a phantom piece of stock," said consultant Peter Gleason of Dallas-based Pritchett & Associates. "They set a target price and however much the stock goes above that, they get that piece of cash."

The compensation details are included in a voluminous filing with the U.S. Securities and Exchange Commission. The document is intended to give Chrysler shareholders details of the proposed merger before they vote on it at a special meeting Sept. 18 in Wilmington, Del.

Robert Lutz, the former Chrysler vice chairman who retired in June, would receive a $1.3 million cash payment, 244,314 DaimlerChrysler shares worth $25.7 million, and future appreciation rights to an additional 683,380 shares.

Chrysler President Thomas T. Stallkamp would get $1.5 million, 222,947 shares worth $23.5 million, and future appreciation rights to 379,384 shares.

All the figures are based on Chrysler's executive compensation plan requirements set in 1995, the company said.

Daimler-Benz issued a report Thursday estimating that the merger will save the two companies $3.1 billion over three to five years. The savings are expected primarily from the pooling of technology and know-how, Daimler said in a news release summarizing the report.

The figure compares to the rough estimate of $2.8 billion given by the companies when they announced in May they would merge to create the world's third-largest automaker.

Daimler said its business is being valued for the deal at $61.1 billion, or $104.75 a share. Chrysler is being valued at $45.7 billion, or $66.29 a share.

Chrysler stock will be exchanged at a rate of 0.6235 share of the new company for each Chrysler share.

Based on a July 20 valuation, Daimler-Benz shareholders would control 58 percent of the new company, and Chrysler shareholders would own the remaining 42 percent. That is 1 percent less for Chrysler than when the deal was announced in May.

The proxy statement also says the companies have asked to be included in the S&P 500 stock index. If the listing were denied, mutua funds tied to the index would sell their shares, which could hurt the price for DaimlerChrysler shares.

A decision by Standard & Poor's is expected in October, Chrysler said.

Chrysler expects the merger, if approved by shareholders, to be completed by early December.

Written By Brian S. Akre

View CBS News In
CBS News App Open
Chrome Safari Continue