General Motors' chief executive Rick Wagoner has accepted a 50 per cent cut in his $2.2m (£1.3m) annual salary to cushion the blow of the car maker's first dividend cut in 13 years.
Mr Wagoner and fellow executives bowed to pressure to share the pain of a restructuring that already includes 30,000 job cuts and the closure of a dozen North American factories.
The company halved its dividend yesterday, just a day after inviting on to the board a representative of one of its biggest shareholders, who has been agitating for a reduction in the payout for several months. Wall Street continues to fret that GM will slide into bankruptcy if it cannot quickly cut costs and come up with attractive new models.
Mr Wagoner said the world's largest car manufacturer was facing the most challenging period in its 100-year history. It slumped to an $8.6bn loss last year, facing tougher competition from Asian rivals who have muscled in on the pick-up and utility vehicle market, and as the locus of innovation in the industry shifts from its historic heartland in Detroit.
"While our 'pay-for-performance' executive compensation system is already structured to significantly reduce total compensation when our business performance and stock price are underperforming, we all agreed that this is the right step to take at this time," Mr Wagoner said. His pay is to be halved, while other board members have agreed to cuts of between 10 and 30 per cent.
GM executives have calculated that making personal sacrifices will help negotiations over the future of the company's middle management pension plans, and the company threatened yesterday to close some of its defined-benefit funds. Mr Wagoner said: "While we will announce specific details early next month, we intend to freeze accrued benefits in the current plan and implement a new plan for future accruals which could include a defined contribution or cash balance plan."
The dividend will be halved to a dollar a share, the company said. The move had been the main demand of Kirk Kerkorian, the billionaire investor who is GM's biggest individual shareholder, with 9.9 per cent. His adviser, Jerome York - a corporate turnaround specialist whose credits include IBM and Chrysler - was appointed to the GM board on Monday.
The cut was widely expected on Wall Street but analysts are hoping for still more vigorous measures if the company is to avert a slide towards bankruptcy protection. There was disappointment that the sale of a stake in the company's profitable finance arm GMAC is still to be finalised.
GM bonds, whose downgrade to junk status sparked a global financial panic last spring, initially rallied. The dividend cut, healthcare benefit reductions and the cuts to executive pay will save GM an estimated $750m a year in cash.Reuse content