GM CEO Takes Big Pay Cut
General Motors Corp., struggling with billions of dollars of losses in North America, announced Tuesday it is cutting in half its yearly dividend to $1 a share and reducing the salaries of its chairman and senior leadership.
The cut in its dividend will reduce GM's yearly cash payout by about $565 million. The automaker also plans to cut health benefits for salaried retirees and evaluate ways to restructure its pension plan for salaried U.S. workers.
The announcements came a day after a top aide to billionaire investor Kirk Kerkorian was elected to GM's board. Last month, Jerome York outlined tough measures to bring the company back to profitability, including halving GM's dividend, cutting executive pay and setting profitability goals.
"These are difficult decisions that involve sacrifices by our employees, stockholders, retirees and the senior leadership team," GM Chairman and CEO Rick Wagoner said in a statement.
"However, we are confronting a dramatic change in our industry and in the global competitive environment, and that requires us to look for additional ways to reduce financial risk and improve our competitiveness for the long term."
As part of the changes, Wagoner will take a 50 percent pay cut. Vice Chairmen John Devine, Bob Lutz and Fritz Henderson will see their salaries reduced by 30 percent, and Executive Vice President and General Counsel Thomas Gottschalk will take a 10 percent cut.
In addition, there will be no annual or long-term cash bonuses paid to GM's global executives for 2005 performance.
General Motors, the world's biggest automaker, had already announced a restructuring plan in November that will shave its work force by 30,000 and close 12 North American facilities.
Last month, at the North American International Auto Show, General Motors said it would lower the prices on 57 of its 76 models in North America in an effort to boost its sliding market share and wean buyers off expensive incentives.
GM has been struggling for years to overcome negative perceptions about the quality of its vehicles. Mark LaNeve, vice president of sales and marketing, said the company will be introducing aggressive new ads that invite buyers to compare their vehicles to any others on the market.
GM also has struggled trying to get away from expensive incentives that it launched after the Sept. 11 attacks. Incentives like last summer's employee-discount plan have led to big short-term sales gains, but they have hurt the company's image because they can cheapen the brand image and hurt resale values.
General Motors is the third of the Big Three U.S. automakers to announce draconian measures this year.
Last month, Ford said that it plans to close 14 plants over the next six years and eliminate as many as 30,000 jobs, half through attrition and half through layoffs.
On the same day, DaimlerChrysler AG said that it would reduce administrative staff by 20 percent over three years, cutting 6,000 jobs in such areas as accounting, auditing, personnel and strategic planning and saving some $1.2 billion a year.
A few days later, President Bush offered no encouragement to any U.S. automobile companies that might be thinking about turning to the federal government for a financial bailout.
"I think it's very important for the market to function," he said in an interview in The Wall Street Journal, which said Mr. Bush suggested that he was optimistic about the companies' prospects.
He said companies need to manufacture "a product that's relevant" and that his administration has discussed new fuel technologies with the nation's top two auto makers.