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Big cuts at GM

Big cuts at GM
Company slashes dividend , cuts executive pay, caps retiree health benefits
February 7, 2006
By MICHAEL ELLIS
FREE PRESS BUSINESS WRITER

General Motors Corp. on Tuesday said that it will cap retiree health care benefits for salaried retirees, restructure its U.S. white-collar pension plan, halve its dividend and cut executive and board pay to reduce costs and help the automaker return to profitability.

The changes, announced by GM Chief Executive Rick Wagoner, come one day after the automaker announced that it elected Jerome York, an advisor to GM’s largest individual investor, to its board of directors.

Beginning in January 2007, GM will cap the amount it contributes to its salaried health care benefits for retirees at 2006 levels, effectively transferring the 9% to 10% annual increases in health care costs to retirees. Employees hired after Jan. 1, 1993 are not eligible for retiree health care benefits and are not affected by the changes.

Next year, GM will reassess the health care benefits for retired white-collar workers, and consider program changes such as higher monthly contributions, deductibles, coinsurance and other options.

GM said it is also reevaluating its U.S. salaried pension benefits, and will announce changes next month. GM intends to freeze accrued benefits in the current plan and implement a new retiree plan that could include a defined contribution or a cash balance plan. The changes will not affect current retirees or their surviving spouses who are drawing benefits from the salaried retirement program.

GM also cut its quarterly dividend in half to 25 cents per share from 50 cents previously. In addition, GM’s executives and board will see their pay cut.

GM will cut Wagoner’s pay by 50%, while Vice Chairmen John Devine, Bob Lutz and Fritz Henderson will have their pay cut by 30%. Executive Vice President and General Counsel Thomas Gottschalk will have his pay cut by 10%.

UAW President Ron Gettlefinger welcomed the cuts. “It was a positive move on their part. It's something we've been asking for since last summer,” he told the Free Press when asked about the cuts in the dividend and executive pay.

GM shares fell 10 cents to $23.24 on the New York Stock Exchange in early trading on Tuesday.

Contact MICHAEL ELLIS at 313-222-8784 or [e-mail]. Business writer Justin Hyde contributed to this report


LINK: http://www.freep.com/apps/pbcs.dll/article?AID=/20060207/NEWS99/60207001