It's a tough spot Smith has put himself and the Chargers in. First, here is
LT's contract information:
3/10/2009: Signed a three-year, $17.875 million contract. The deal contains $7.725 million guaranteed, including a $2.875 million signing bonus and $1 million of his second-year salary. Another $2 million is available through yardage-based incentives in 2010. 2009: $3.825 million, 2010: $3 million (+ $2 million roster bonus due in March), 2011: $6.15 million, 2012: Free Agent
So they still have an outstanding cap charge of $1.92M (remaining amortized signing bonus) + $1M (the guaranteed portion of his 2010 salary). So cutting him this offseason means they take a $2.92M cap hit, as compared to a $5.96M cap hit if they keep him on the roster for 2010 (includes one year of the signing bonus, but no incentives). So they save $3M on the cap next year if they cut him before the roster bonus. It's probably not worth paying the extra $3M to keep him mostly for nostalgic reasons now that his performance has declined.However, if he renegotiated his contract and the roster bonus were to go away, and he just made the scheduled $3M for next year, then there would be less than $1M in cap savings in cutting him... which could mean they'd keep him. I'm not sure how likely he is to completely forego that bonus, but he'd have to ask himself what his market will look like if he is cut. That is, is he likely to get paid more than $3M by someone else? And will it be enough of a difference to leave San Diego?
Playing into this is what will happen with Sproles. Sproles was tagged last offseason and is currently playing under a one-year, $6.621 million contract. Despite LT's struggles this year, San Diego has not really turned to Sproles to give him a serious look as a runner. Sproles is having a good year as a returner and as a receiver... but I'm not sure he is really worth the $6.6M he is making given how little they are using him - 74 touches on offense in 8 games, despite the fact that LT missed two games. I think Sproles is a dynamic receiver, but the Chargers have a good receiving group even without him, so I suspect Sproles will be gone next year, unless he is willing to sign a multi-year contract for considerably less than he is making right now. I do think that is possible, since like LT I doubt other teams will be interested in paying him close to what he is making right now to be a returner and receiver, and I don't know why any team would be confident enough in him as a runner to sign him to a larger role.
If Sproles is gone and LT reduces or waives his roster bonus to stay in San Diego, I could see LT becoming a third down RB and the Chargers drafting a RB early to be the main guy in a committee.
If LT will not reduce or waive his roster bonus, I could see him getting cut and Sproles staying at a reduced rate to continue his returner/receiver role. Again, the Chargers would presumably need to draft a RB early to be the main guy in a committee.
I expect one of the two scenarios above to be what happens, but it's possible that both LT and Sproles will be gone. That would virtually force the Chargers to go RB in the first round.
Smith has not been typically inclined to sign free agents to step in and start at key positions. I don't really see him going the free agent route. I think a trade would be more likely than a free agent, and using the draft is the most likely outcome.