Despite the auto industry's troubles, most automotive CEOs are making much more money.
Last year, 31 chief executives of U.S. automakers, suppliers and publicly traded dealership groups had a median income of $4.2 million. That's up a stunning 72 percent from 2003.
Much of that increase was because of generous awards of restricted stock to the CEOs.
The compensation data were drawn from proxy statements issued by major dealership groups and suppliers - plus General Motors and Ford Motor Co. The Chrysler group is not included because it no longer issues a proxy.
Once again, suppliers dominate the list. Nine of the 10 best-paid executives are suppliers. And the top earner - Frank Stronach, founder of Magna International Inc. - is a supplier. He earned $40.3 million in 2004.
Stronach eclipsed last year's top earner - Richard E. Dauch of American Axle & Manufacturing Holdings Inc. - who fell to eighth place.
Unlike other automotive CEOs, Stronach did not earn his big payday as a company employee. The mercurial Canadian earned it as a consultant. According to his company's proxy, Stronach received $40 million in fees for drumming up business for Magna's European operation.
This year's list lacks one major supplier CEO - J.T. Battenberg III, of Delphi Corp. At press time, Delphi had not filed its proxy.
The executives' compensation includes salary, annual bonus, grants of restricted stock, long-term bonus payments, exercised stock options, perks and other cash payments. Unexercised stock options are not included.
In contrast to Stronach, the other CEOs earned their money in more traditional ways. The second biggest paycheck went to W. James Farrell of Illinois Tool Works Inc.. He earned $33.3 million after cashing in a passel of stock options.
The third largest paycheck went to Bill Ford Jr. of Ford Motor Co., who earned $17.5 million. Again, he drew no salary, but he did receive $11.9 million in restricted stock.
That was enough to give him a substantial raise compared with 2003, when he earned $1.7 million. Bill Ford has said he plans to donate a big chunk of his pay to charity.
Ford Motor's other top executives - James Padilla, Greg Smith, and the now-retired Allan Gilmour and Nick Scheele - also fared well. But each of GM's top five executives suffered a sharp decline in compensation. Chairman Rick Wagoner earned $4.8 million, down 43 percent from 2003.
Still, there's nothing extraordinary about Bill Ford's restricted stock award.
Throughout corporate America, restricted stock has become a popular alternative to stock options. Last year, 12 automotive CEOs received restricted stock worth a cumulative $40 million, double the amount granted in 2003.
Restricted stock is like conventional stock, with one proviso: the recipient typically must remain with the company for a specified time before receiving the stock. Unlike stock options, restricted stock does not go "underwater" - that is, become worthless - if the stock price declines.
Corporate watchdogs sometimes criticize awards of restricted stock as "pay for good attendance." But the most controversial practices involve the rich pay packages offered to corporate chiefs who resign under pressure.
Consider the case of John Blystone, the former chief executive of SPX Corp., who topped Automotive News' CEO compensation list in 2003.
After joining SPX in 1995, Blystone diversified the company with an ambitious series of acquisitions. SPX, a Charlotte, N.C., maker of die castings, diagnostic repair tools and nonautomotive products, grew into a $4.3 billion company.
Blystone was generously compensated. In 2002, he received restricted stock worth $48.9 million. But he subsequently angered shareholders when he sold some stock a few weeks before releasing a poor quarterly earnings report.
Two major shareholders began to criticize management, and Blystone resigned in December. He gave up his award of restricted stock but did not walk away empty-handed. Last year, Blystone earned $39.8 million, including his separation payment.
What's the bottom line for SPX? Blystone's expansion plans have been delayed. The company plans to sell assets in a bid to trim debt.
After Frank Stronach, from left, are James Farrell of Illinois Tool Works, $33,250,227; Bill Ford of Ford Motor Co., $17,512,223; Alexander Cutler of Eaton Corp., $13,775,713; and T.M. Solso of Cummins Engine Co.
The auto executives' heady pay increases outstripped those of other industries, according to a survey released in April by Pearl Meyer & Partners, a New York consulting firm that studies executive compensation.
The survey calculated the compensation for 179 CEOs that work for major U.S. companies. In the category "motor vehicles and parts," CEO compensation averaged $6.8 million - well below average.
But their compensation rose 71 percent last year, easily outstripping an average 17.5 percent increase for all CEOs.
The survey also found that executive pay increases were fueled primarily by bigger cash bonuses and bigger grants of restricted stock. The median value of restricted stock awarded to the CEOs last year doubled over 2003.
Institutional investors are starting to notice these pay practices, and they are not amused. According to a Pearl Meyer survey of 88 major institutional investors, 59 percent are opposed to "golden parachutes" for chief executives, and 75 percent say chief executives of major U.S. companies are overpaid.
"Major investors may be buying the stock, but they're no longer buying the company line," said Chairman Pearl Meyer in written comments. "The survey indicates that money managers are highly skeptical of the rationales behind some key long-time compensation practices."
You may e-mail David Sedgwick at [email protected]
You may e-mail Gail Kachadourian at [email protected]