GM spreads sacrifices to try to
reverse big losses
General Motors halved its dividend and made pension, salary and
health care cuts. Top executives also agreed to pay reductions.
By Micheline Maynard, New York Times
Mpls Star Tribune
Wednesday, February 8, 2006
DETROIT - General Motors Corp., under pressure to show its
blue-collar workers that investors and executives are prepared
to sacrifice to help overcome the company's deepest losses in
more than a decade, said Tuesday that it would reduce pay for
top officials and cut its stock dividend in half. GM also
announced changes in the pension and health care plans for its
retired salaried workers as it struggles to turn around its
operations and avoid a potential bankruptcy.
The executive pay cuts -- from 50 percent for GM's chairman to
10 percent for a few other senior executives along with the
elimination of management bonuses this year -- affect only a
small number of people and save relatively little compared with
the dividend and health care contributions cuts.
But even as executives played down their intent, the moves are
important symbolically to go along with the givebacks GM has won
from its union workers and to set the stage for more concessions
it intends to seek from the United Automobile Workers in talks
next year. UAW leaders said that union workers have given
enough and that they will not discuss more concessions ahead of
Tuesday's moves eventually are expected to reduce the company's
annual structural costs by more than $900 million, with the
dividend cut helping to preserve $565 million in cash each
year. Overall, the company is aiming at annual cost cuts of
about $7 billion.
But two steps that have been widely anticipated were not part of
the announcement. GM did not disclose any developments in the
long-awaited sale of its GMAC finance unit. Nor did it disclose
an agreement concerning the UAW and Delphi Corp., GM's former
parts unit, which is operating in bankruptcy.
As a result, many analysts said the troubles at GM, which lost
$8.6 billion in 2005, are far from over.
"We believe that there is more to come," John Murphy, an analyst
with Merrill Lynch, wrote in a research note. "Ultimately, we
believe that an active downsizing of the company to a defensible
market share will be necessary."
GM stock fell 53 cents, to $22.81 a share.
Along with its losses, GM's U.S. market share fell to just over
26 percent last year, its lowest since 1925. In November, GM
said it would close all or part of 12 plants and eliminate
Yet, its biggest shareholder, Kirk Kerkorian, wants the company
to do more -- and GM is at least partially listening. Its
latest moves were announced a day after the company gave a seat
on its board to Jerome York, a Kerkorian ally.
York had called for many of Tuesday's steps in a Jan. 10 speech
in Detroit, saying the company needed to move more swiftly on
the turnaround effort that began late last year. But the
company rejected several of York's recommendations, including
broader cuts in executive pay and paring back on its car and
Moreover, CEO Rick Wagoner declined Tuesday to predict when GM
would return to profitability, resisting York's call for the
company to set clear financial goals.
Wagoner, who received $2.2 million in 2005, will take a 50
percent pay cut to $1.1 million. Vice Chairman Robert Lutz, who
earns $1.55 million a year, will take a 30 percent cut, as will
Vice Chairman John Devine and Chief Financial Officer Frederick
But York called for a sliding scale of cuts affecting
executives, managers and salaried employees. Such steps have
taken place at bankrupt airlines such as Northwest.
Last year, union members voted to accept a plan that would
require them to pay for part of their health care coverage,
which had been virtually free.