I am not using this as a debate over "to bailout, or not to bailout", I just want to shed some light on the rumored 20 million dollar severance package that Rick Wagoner is reportedly getting.
That 20 million is not what it's cracked up to be. When the Obama administration asked Rick to step down there were numerous reports of a 20 million dollar severance payout. News stories such as this one from ABC, conitnued to spread the bad press about the auto industry. In reality the 20 million was not so real.....
From the Mariam Webster Online dictionary, the defintion of a "Golden Parachute" is: a generous severance agreement for a corporate executive in the event of a sudden dismissal (as because of a merger)
This is not what Mr. Wagoner got.
Dave Schmidt, an executive compensation analyst with James F. Reda and Associates, says that less than $1 million of Wagoner's total $20.2 million pension package appears to be guaranteed if GM goes bankrupt.
This is a true statement. 19.2 million of the reported 20.2 million is part of an annuity scheduled to pay out 4.5 million a year for five years. If GM goes bankrupt this money is unsecured and Rick would lose all of it. If he manages to get out the first 4.5 million to pay his bills, he would be forced to give it back! Damn!!!
Severance package is not looking so good now is it?
That leaves our man Rick with only $980,000.00. That sounds like a lot to you and I, but that's nothing for someone who has been earning a salary btween 1 and 2.2 million per year for the last 8 years. That's like you trying to retire on $80,000.00.
It gets worse: that $980,000 isn't payable in one lump sum. He has to withdraw that annually, payable in installments of $68,900. Good luck paying for the private jet on $70K per year.
I'm sure Rick will get another 7 figure job, but for now he can collect unmployment like the other 13% of Michigan, which happens to be about $380/ week........and you have to pay taxes on that.