General Motors said Feb. 8 it would slash pay for its top executives and halve its annual dividend as part of a further effort to get the struggling auto giant back to profitability. The new cuts come on top of a massive effort to trim $7 billion from annual costs through agreements with the United Auto Workers union and through supply cost reductions.
In the latest effort, GM said it would cut by half its $2 annual dividend per share and make a "significant reduction in salary for GM's chairman and senior leadership team" and a similar cut in compensation for outside board members.
GM also said it was restructuring its pension plan for salaried workers and will revise its salaried-retiree health care benefits to cut its liability by $4.8 billion before taxes.
The lowered dividend, expected by many on Wall Street, reduces GM's cash outlay by $565 million a year. The company will now pay out 25 cents a share on March 10 to shareholders of record on February 16. The two-dollar annual dividend had indicated a yield on GM stock of more than 8%, the highest of any Dow Jones Industrial Average component.
"These are difficult decisions that involve sacrifices by our employees, stockholders, retirees and the senior leadership team," GM chairman and CEO Rick Wagoner said. "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."
The new plan calls for a 50% reduction in Wagoner's annual $2.2 million salary, along with a 30% cut in pay for GM's vice chairmen, Bob Lutz and Frederick (Fritz) Henderson, as well as a 10% salary reduction for GM's general counsel, Thomas Gottschalk. GM's board members themselves will have their compensation cut by 50% to $100,000.
