GM chief agrees to halve salary

The chief executive of General Motors (GM) is to take a 50% pay cut to help the struggling carmaker save money.

Rick Wagoner and other executives have agreed to reduce their pay and forgo bonuses as part of radical measures aimed at improving GM’s finances.

GM is also halving its annual investor dividend – the first cut in 13 years – which will save it $565m (£323m).

The US giant is struggling with stagnant sales and huge losses totalling billions of dollars.

Burdened with massive healthcare and pensions costs, GM has already announced 30,000 job losses and nine factory closures in North America.

The carmaker made a $4.8bn loss in the final quarter of last year, its problems stemming from rising labour costs and falling US sales.

Mr Wagoner and other directors have agreed to make personal sacrifices to help aid GM’s financial recovery.

Mr Wagoner, who was paid a basic salary of $2.2m in 2004, will see his salary halved while four other directors are also taking big pay cuts.

No executive directors will receive bonuses for the 2005 financial year – in which GM’s losses mounted – while the firm’s non-executive directors will not be paid a salary in future.

In other radical moves, GM is to cap contributions to its employee healthcare scheme at 2006 levels from the start of 2007.

This action will reduce GM’s liabilities by $4.8bn and cut annual healthcare expenses by $900m.

The carmaker also plans to freeze current pension payments and restructure its employee pension scheme.

“These are difficult decisions that involve sacrifices by our employees, stockholders, retirees and the senior leadership team,” Mr Wagoner said.

“We are confronting 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 in the long term,” he added.

The measures, on top of halving its annual dividend to $1 a share, are GM’s latest acts of retrenchment as it tries to make itself more competitive.

GM has struggled in the face of fierce competition from Japanese rivals such as Nissan and Toyota, with its US sales particularly weak.

Some analysts have speculated that GM’s problems mean it may have to seek bankruptcy protection.

GM has denied this, saying that it is making “rapid progress” in cost-cutting and developing new models to boost its market share.

GM’s shares – which hit a 20-year low at the end of 2005 – rose slightly on Tuesday in response to the cost-cutting plans.

“GM is beginning to take some strong action,” said Jim Awad, chairman of Awad Asset Management.

“The question is whether those moves will be able to somewhat diminish the risk of bankruptcy.”

GM is not the only US carmaker facing financial difficulties.

Last month Ford said it would cut 30,000 jobs and close 14 North American plants as its sales have also come under pressure.