DETROIT -- General Motors said Tuesday that it will cut its dividend by 50 percent to $1 a year, sharply cut salaries for its top five executives and board members, cut health care benefits for salaried retirees, and restructure its salaried pension benefit plan.
CEO Rick Wagoner said the changes would not result in big cash savings in the short term. But the change in retiree health care benefits would cut GM's liability by about $4.8 billion and its annual health care expense by almost $900 million before taxes.
"We have a solid plan in place to address our weaknesses and take advantage of our strengths," Wagoner said. "It is clear what we need to do, but hard because it affects people. But we must take these steps to ensure our long-term viability."
These changes were announced Tuesday:
GM also plans to freeze the pension plan for current salaried employees and replace it with a new plan. The new plan could include a defined contribution or cash balance plan, Wagoner said. Details will be released in March.
The cuts will be in effect for an undetermined amount of time, Wagoner said.
GM will not release 2005 executive compensation until April.
According to GM's 2004 prospectus, Wagoner's total cash compensation was $4.81 million with his base salary at $2.20 million that year. His total cash compensation dropped by 43.1 percent compared to his 2003 total cash compensation of $8.46 million. His 2003 base salary was $2.20 million.
Devine's 2004 total cash compensation was $4.22 million with a base salary of $1.55 million. Lutz's 2004 salary was also $1.55 million with a total cash compensation of $4.40 million. According to an SEC statement, GM brought Henderson over from Europe late last year for a 2006 salary of $1.55 million. The cut would leave Lutz, Devine and Henderson with about $1.1 million as a base salary.
GM executives did not get an annual incentive bonus for 2005 amid GM's troubled fiscal year.
In addition, the board of directors cut its compensation by 50 percent. Directors who are not GM employees are giving up their cash compensation but will keep some of the stock they are given annually.
Moves studied for months
The changes mirror several suggestions made in a speech last month by Jerry York, an adviser to billionaire investor Kirk Kerkorian, who holds 9.9 percent of GM's stock. York was given a seat on GM's board on Monday.
But Wagoner said Tuesday's moves were not a direct reaction to York's speech.
"The things being announced today, we have been studying for some time," Wagoner said. "We couldn't make a decision in a three-week period that affects 100,000 people. Studies on these issues have been in work for a while. The dividend comes up for review every quarter. It made sense to put them all together."
Wagoner also rejected the notion that salary and benefit cuts were sending a message to the UAW that it needs to accept cuts.
"This is too important a decision to use it to send messages to third parties," Wagoner said. "I'm not sure you make progress by scorekeeping everybody's sacrifice.
I've had a lot of experience in working on competitive issues with the UAW, and I know we make the most progress by sitting down and working face to face. We will continue to do that. It's not productive to move those discussions into the public domain."
UAW President Ron Gettelfinger called the cuts to GM's dividend and executive salaries "a positive move."
He added, "We've been calling for that since last summer."
But Gettelfinger warned against expecting company management to come back to the union for more concessions than it has already given.
"They're not going to come back to us. I don't think that you'll see that happen," Gettelfinger told reporters Tuesday morning during a break in the UAW's Washington conference.
Gettelfinger said he would not speculate on whether York's appointment to the GM board will lead to tougher contract negotiations next year, as some analysts have predicted.
No need to cut brands
Wagoner said he doesn't see a need for GM to shut down any of its vehicle brands to bring the automaker back to profitability.
"I'm probably one of the few auto executives that has had an opportunity to euthanize a brand. It is no fun and expensive," Wagoner said. "The question is: Are we using them the right way? I don't see a big panacea in reducing the brands we have."
Staff reporters Jamie LaReau and Harry Stoffer contributed to this report
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