GM cuts dividend, executive salaries

GM cuts dividend, executive salaries

	Published : Wed, 08 Feb 2006 14:00 By : David Simms Print this Story

DETROIT: General Motors Corp. cut its dividend by half and reduced salaries for executives Tuesday, which is seen as an attempt to gain support from its workers for similar cost cutting measures to stave of a possible bankruptcy.

The automobile major's board of directors, which had been under pressure from the company's largest investor, Kirk Kerkorian, slashed the dividend to an annual rate of $1 a share, reducing the quantum by $565 million a year. Kerkorian's chief adviser Jerome York is on the board since Monday.

The company's chairman and chief executive Rick Wagoner will take a 50 per cent salary cut, while Vice Chairmen John Devine, Robert Lutz and Fritz Henderson will have their salaries reduced by 30 per cent.

The board also reduced its compensation by 50 per cent to $100,000 a year. Non-employee directors will forgo cash compensation but will keep some of the stock portions of their annual retainership.

General Motors had posted a $8.6 billion loss in 2005 and is making attempts to control its high labour and raw material costs.

York, who had been taking keen interest in the revival of the automaker, had suggested in December that the dividend should be cut, that its non-core brands like Saab and Hummer should be withdrawn and the management pay should be reduced.

The company's loss in 2005 has been its highest since 1992, when it last cut its dividend.

The company said cash savings from these steps would total $200 million within five years and it will continue rising after that.

The company intends to cap its contributions to salaried retiree health care at the level of its 2006 expenditure, effective 1 January 2007. It would cut pretax health-care expenses by $900 million annually and reduce health-care liabilities by $4.8 billion. It is also planning to effect changes in salaried employees' pension schemes.

Wagoner denied the dividend and salary cuts constituted a message to the workers' union. He told a press conference that it is a message that "the company is going to take the steps necessary to address the losses of last year and get profitable".

He said the management will continue to sit with the union and discuss areas where there is need to improve competitiveness.

The company is trying to sell its majority stake in its finance arm, General Motors Acceptance Corp., to restore the latter's investment-grade credit rating and get access to cheaper financing. It is in talks with its bankrupt autoparts supplier Delphi Corp. and the union about possible wage and job cuts. GM, which had spun off Delphi in 1999, is expected to take care of the wages of some hourly employees, who were transferred there.