- The Washington Times - Tuesday, February 7, 2006

DETROIT (AP) — General Motors Corp. announced plans yesterday to rein in white-collar pension and health care expenses, slash its dividend and trim executive salaries — moves that suggest the automaker might seek benefit cuts from union workers, too.

The cuts in health benefits for salaried retirees, planned changes to its pension plan for salaried U.S. workers and the decision to cut GM’s dividend in half all support the company’s North American turnaround efforts, which already include plans to shed 30,000 hourly jobs and close 12 facilities by 2008.

GM has been under pressure from one of its largest shareholders, billionaire investor Kirk Kerkorian, to take more aggressive steps to revive profitability.

“Everybody’s got a piece of it,” GM Chairman and CEO Rick Wagoner told reporters at GM’s headquarters. “What we’re trying to do is look at each piece and say, ‘Where are we really uncompetitive versus the people we run against?’ … If we’re out of line, that’s what we need to work on.”

The cut in its dividend alone will reduce GM’s yearly cash payout by about $565 million. Cash savings from the health care changes will grow to about $200 million within five years, GM said, and then continue to increase after that.

GM, which is reeling from declining U.S. market share at the hands of its Asian competitors, lost $8.6 billion in 2005 amid high health, pension, labor and materials costs. GM is counting on its new lineup of SUVs to boost sales this year, and is trying to wean itself off costly, confusing incentives.

Analysts said yesterday’s cuts could help provide leverage for GM in contract talks next year with the United Auto Workers. And it could help GM in talks with the union on a possible bailout for hourly workers of Delphi Corp., GM’s former parts division, which filed for bankruptcy last fall.

“The dividend cut … is only a modest step,” credit ratings agency Fitch Ratings said. “The cuts in the dividend and in management compensation could, however, facilitate conversations with the UAW.”

Asked yesterday whether GM’s move might lead to future concessions by the union, UAW President Ron Gettelfinger said: “Absolutely not. We’ve done our share. We’re ready to move forward.”

As part of yesterday’s changes, Mr. Wagoner will take a 50 percent pay cut, reducing his salary to $1.1 million. Details on his 2005 compensation won’t be released until this spring, but GM said he won’t get a bonus.

Vice Chairmen John Devine, Bob Lutz and Fritz Henderson will see their salaries reduced by 30 percent, and Executive Vice President and General Counsel Thomas Gottschalk will take a 10 percent cut. There will be no cash bonuses paid to GM’s global executives for 2005 performance, GM said.

The board also reduced its own compensation by 50 percent to $100,000 a year, the company said. Non-employee directors will forgo cash compensation but will keep some of the stock portion of their annual retainer.

GM said its quarterly dividend would be 25 cents a share, compared with 50 cents, where it has stood since the first quarter of 1997.

Shares of GM fell 53 cents, or 2.3 percent, to close at $22.81 yesterday in regular trading on the New York Stock Exchange.


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