GM CEO Takes Big Pay Cut

Automaker Cutting Dividend, Executive Salaries, Retiree Benefits

(CBS/AP)  General Motors Corp., under shareholder pressure to return to profitability, announced Tuesday that it is cutting in half its yearly dividend to $1 a share and reducing the salaries of its chairman and senior leadership team.

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, reducing costs to balance out billions of dollars of losses in its North American automaking operations.

The changes don't affect GM's manufacturing employees, reports Jeff Gilbert of CBS radio station WWJ-AM.

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."

Wagoner said the new actions support the company's ongoing North American turnaround plan.

Although some of GM's actions mirrored York's suggestions, Wagoner said the company has long been working on issues such as health care and pension costs. And he said GM didn't plan to release profitability goals.

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.

The board of directors also reduced its own compensation by 50 percent, the company said. Non-employee directors will forgo cash compensation but will keep some of the stock portion of their annual retainer.

GM said it would cap its health-care contributions for salaried retirees at 2006 levels. The change, which affects retirees hired before 1993, surviving spouses and eligible dependents, will reduce GM's annual health-care expense by almost $900 million before taxes, the company said.

The automaker said it was evaluating ways to restructure its pension plan for salaried workers. GM said it would freeze accruals under the current plan and implement a new plan for future accruals, possibly a defined-contribution or cash-balance plan.

GM said its quarterly dividend would be 25 cents a share, compared with 50 cents, where it has stood since the first quarter of 1997.

The company last cut its dividend in 1992, when it lost a record $23.5 billion, partly as a result of accounting changes.