SEC wrapping up GM investigation
Thursday, May 10, 2007
SEC wrapping up GM investigation
David Shepardson / Detroit News Washington Bureau
WASHINGTON -- The Securities and Exchange Commission is nearing the end of its 2 1/2-year investigation into accounting errors at General Motors Corp. following the testimony of more than a dozen current and former GM executives.
The SEC may decide whether to bring civil charges by the end of the summer, people familiar with the investigation told The Detroit News on Wednesday.
The previously disclosed probe centers on GM's relationship and transactions with its former parts unit, Delphi Corp., as well as GM's use of credits from other suppliers. The SEC also has investigated whether GM improperly sought to influence Delphi and whether it properly spun off the unit in 1999. Nobody at GM has been accused of any wrongdoing.
Since first receiving a subpoena in October 2004 as part of an inquiry into pension practices at large companies, GM has been forced to repeatedly restate its financial results and has admitted to numerous accounting errors. The company vowed to improve its balance sheet and hired a new controller, a new chief accounting officer and a consulting firm to shore up its financial practices.
The SEC has repeatedly expanded its investigation into other areas of GM's accounting. The SEC has also sought information about GM's pension obligations for Delphi employees in the wake of the Troy-based supplier's 2005 bankruptcy filing, among other issues.
The U.S. Attorney's Office in New York, aided by a federal grand jury, has been looking into GM's accounting for supplier credits since early 2006.
GM spokeswoman Renee Rashid-Merem reiterated the company's position Wednesday that it is cooperating with the investigations but declined to discuss details of the investigations.
The SEC has essentially concluded its interviews with current and former GM officials, along with people at other companies who were involved in transactions with the Detroit automaker.
Within three months, the SEC could be ready to decide whether to bring civil charges against the automaker or any current or former executives, said people familiar with the investigation.
Before that, GM could engage in settlement talks, especially in the wake of its admissions in March that its accounting had suffered "material weaknesses."
Peter Henning, a Wayne State University law professor and former SEC attorney, said GM likely will seek a settlement that carries only an administrative penalty.
Henning said the accounting problems at GM have never risen to the level of those at Delphi, which resulted in the eventual departure of former Delphi Chairman and Chief Executive J.T. Battenberg III and other executives. "My sense is that was at a lower level at GM," he said.
The most troubling accounting issue for GM is its use of "supplier credits," which are rebates that help boost revenue or earnings, and whether that use misled investors.
The issue is at the heart of a number of auto sector-related accounting investigations.
The SEC has said large auto suppliers -- including Delphi and Southfield-based Collins & Aikman -- have pressured suppliers to kick back money in order to meet earnings targets or used fraudulent accounting tricks to boost revenue.
The SEC has settled allegations of accounting misconduct against both auto suppliers, while filing civil charges against former executives at both companies.
GM chairman and CEO Rick Wagoner has testified before the SEC -- though not in connection with the accounting probes at GM, people familiar with the investigation said. It is not clear what the focus of that testimony was.
Wagoner told shareholders in the company's annual report "that management is focused on continuing to strengthen our internal accounting resources and financial reporting."
In October, the SEC charged Delphi and nine former company officials, including Battenberg, in a wide-ranging accounting fraud complaint. The Justice Department is continuing a parallel criminal investigation into the conduct of former Delphi officials.
In early 2000, a dispute between GM and Delphi arose when GM demanded $800 million in pre-spinoff warranty claims.
In a recent court filing, Battenberg's lawyers said the request was without merit. When GM spun off Delphi in 1999, it established only a $53 million reserve for warranty claims, and warranty claims had averaged just $30 million a year prior to the spinoff.
Battenberg admitted that senior GM officials suggested in September 2000 that the two companies account for a "settlement asymmetrically," allowing both companies to benefit.
In March 2006, GM admitted to a number of accounting mistakes, including overstating net income in 2001 by $405 million -- or 35 percent -- because it incorrectly recorded supplier credits, mainly involving Delphi.
GM subsequently restated earnings for 2002-05, and for the first three quarters of 2006. "Errors that require restatements are unacceptable and embarrassing for the corporation and for me personally," GM Chief Financial Officer Frederick "Fritz" Henderson wrote in an e-mail to employees in January, when the latest restatements were announced.
GM has reviewed millions of pages of records and turned over hundreds of thousands of pages of records to the SEC. Lawyers for GM have interviewed dozens of GM finance and accounting workers while collecting documents and e-mails in connection with requests by the SEC.
GM has hired a number of lawyers to represent the company and its executives in the probe, including Anton Valukas, a former U.S. attorney in Chicago, and Thomas Newkirk, a former associate director in the SEC's division of enforcement.
You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com.
© Copyright 2007 The Detroit News. All rights reserved.
GM tightens exec exit policies
Friday, May 11, 2007
GM tightens exec exit policies
Before they could get millions in takeover; now firing without cause is the only way to collect.
Sharon Terlep / The Detroit News
Like many Fortune 500 CEOs, General Motors Corp.'s Rick Wagoner has a multimillion dollar golden parachute to protect him if the automaker is ever to be taken over.
But this year, GM tightened its policies under which its top executives can receive severance payouts.
Wagoner stands to receive up to $14 million in severance and stock payouts, according to GM's proxy filed April 27. Other top execs have similar exit packages.
In the past, only a change of control at GM was required to trigger the payouts. But under GM's new policy, the executives also would have to be fired without cause to receive the payouts. Corporate governance experts say revised policy is more fair to shareholders.
The requirement may be one reason why GM decided to change its policies this year.
"It's a combination of 'We have to disclose this stuff, so we need to make it as pretty as we can,' and just wanting to be more responsible," said Dan Moynihan, an executive pay expert with Compensation Resources Inc. in New Jersey. "Companies are doing this out of a desire to make executive compensation as shareholder-friendly as possible."
This the first year the SEC has required public companies to disclose details about what executives could get in total compensation if they were to be fired.
The new rules come in an era of heightened scrutiny surrounding corporate accounting practices and executive pay packages.
The disclosures show the severance packages have become commonplace among large corporations. That's especially true in the auto industry, where the growing clout of cash-rich private equity firms combined with the diminishing capital of auto companies is making even the biggest players more susceptible to takeovers.
"In the current environment, every company needs to be concerned with protection from a takeover," said analyst John Casesa, managing partner of Casesa Shapiro Group. "It's not unusual anymore."
Wagoner's payment would come in the form of $9.4 million in stock and options that would become fully vested upon his termination. He would then be eligible for up to three times his annual $1.65 million salary -- or about $5 million, according to GM's proxy.
Tightening the policy was "a good thing to do from a corporate governance standpoint," GM spokeswoman Julie Gibson said, adding that such provisions are increasingly common in corporate America.
GM has provisions in place for four other executives. Vice Chairman Bob Lutz has the second richest deal, with $4.8 million in stock and options and potentially $3.5 million in severance pay.
Chief Financial Officer Fritz Henderson would get $2.9 million in stock and options and up to $3.5 million in severance; and manufacturing chief Gary Cowger would get $1.4 million in stock and options and $2.6 million in severance.
At Ford Motor Co., chief executive Alan Mulally could get $27.5 million if he were to be fired as part of a Ford buyout.
© Copyright 2007 The Detroit News. All rights reserved.
GM ramps up truck discounts
Wednesday, May 09, 2007
GM ramps up truck discounts
Free financing, rebates offered for Chevy Silverado, GMC Sierra
Sharon Terlep / The Detroit News
General Motors Corp.'s new full-size pickups just got a little cheaper.
The automaker, aiming to increase sales of its redesigned 2007 Chevrolet Silverado and GMC Sierra in a slumping pickup market, increased incentives on the trucks and for the first-time will offer zero-interest loans on new models.
New deals on the trucks let customers choose between free financing for up to 36 months or between $1,250 and $1,500 cash back on the 2007 models. The previous offer was reduced-rate financing and $750 to $1,250 cash back. Other offers are available on 2006 models.
The deals run through July 9.
In addition, dealers informed The Detroit News of two other unadvertised discounts on the trucks: Dealers can offer $1,000 in bonus cash on Silverado and Sierra models that have been sitting on dealer lots for 90 days or more; and they have the discretion to offer up to four $250 discount coupons to buyers of the new pickup.
GM is walking a fine line in the incentive battle, looking to stay competitive without abandoning its strategy of limiting discounts that cut profits and lower resale value.
"We've been tactical and strategic in how we're responding to the competitive action out there in the market place," GM spokesman John McDonald said. "We're seen a lot of incentive spending by our competitors."
GM has increased its share of the full-size pickup truck segment to 38.8 percent from 36.7 percent this year through April, despite intense competition that includes Toyota Motor Corp.'s first ever full-size Tundra pickup.
Overall, GM's full-size pickup sales are about flat this year to date through April.
While that's better than most competitors, the performance has fallen short of what both GM and analysts expected given that the trucks are completely new and heavily advertised.
"The good news is that although the industry is down overall, GM is up," said Jesse Toprak, chief economist for Edmunds.com. He said a double-digit gain should be the target with a new truck line.
The new Silverado and Sierra, launched late last year, have been well received by critics and the public. Even so, they're taking longer to sell than the outdated models they replaced, and are leaving showrooms with only a few hundreds dollars less in incentives.
Big pickup sales are suffering in the midst of a prolonged slowdown in the U.S. housing and construction markets. Truck sales depend heavily on contractors who use the vehicles for work.
Industrywide, full-size pickups, which account for 22 percent of vehicle sales for Detroit's automakers, were down 10 percent in 2006, according to Autodata Corp.
Sales for the segment were down another 5 percent for the first four months of 2007 compared with the same time last year.
Competition is intense, between Toyota's surprising incentives on the new Tundra and discounts as high as 20 percent on pickups from Ford Motor Co. and the Chrysler Group's Dodge Ram division.
McDonald said GM's internal numbers for the trucks, which account for two fewer selling days in April, show sales up 3.6 percent year to date.
"The bottom line," he said, "is that more people are choosing our trucks over our competitors."
You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.
© Copyright 2007 The Detroit News. All rights reserved.
GM will let top executives trade company's shares
Wednesday, May 09, 2007
GM will let top executives trade company's shares
Company had banned them from buying and selling stock on fears over insider trading.
Jeff Green / Bloomberg News
General Motors Corp. will let Chief Executive Officer Rick Wagoner and about 20 other top executives buy and sell the company's shares, after a two-year ban because of concerns about inadvertent insider trading.
The executive trades will be allowed until May 31, spokeswoman Renee Rashid-Merem said in an interview. The Detroit-based automaker banned such trading in 2005 at about the same time it halted financial forecasts. GM doesn't intend to begin forecasts again, Rashid-Merem said.
"We have resolved a lot of significant matters and provided a lot more detail on pending matters," such as the sale of a stake in its finance unit and labor issues such as health care and buyouts, she said in an interview.
Executives with significant future financial information not available to the public may still be prevented from trading, Rashid-Merem said.
Resuming the trading is another sign of confidence at GM, the largest U.S. automaker, after Wagoner and his top two deputies last month regained half of a 2006 pay cut and in March received their first restricted stock grants since 2003.
Wagoner reiterated last week that he expects automotive operations to improve this year from a $2 billion loss last year.
"If you saw executives buying now, if Rick Wagoner buys some shares, that would probably be a positive signal to the market," said John Novak, an analyst at Morningstar Investment Service Inc. in Chicago who rates GM shares the equivalent of a sell.
"These people have had their hands tied for two years, some people at lower levels may need to sell."
GM hadn't allowed top executives to buy and sell its shares since 2005's first quarter, just before the automaker in April of that year stopped giving profit estimates. The company said it wanted to prevent those with internal financial information from inadvertently engaging in insider trading.
The automaker told employees of the decision on executive trading in an internal announcement Tuesday.
The ban is being lifted after Wagoner narrowed GM's loss to $2 billion last year from $10.4 billion in 2005. The automaker paid 34,400 union workers to leave, closed plants and sold assets that will raise about $16 billion.
Last week, GM said first- quarter profit fell 90 percent because of losses related to home loans at a finance unit and continued North American losses.
Wagoner on April 25 reassured employees that his plan to end losses is working after Toyota Motor Corp. passed GM in first- quarter global sales.
GM said last week it expects to sell 9.2 million cars and trucks worldwide this year, while Toyota forecasts sales of 9.34 million. GM has been No. 1 in global sales for 76 years.
Wagoner's last share activity was in March 2005, when he bought 50,000 shares valued at $1.5 million.
GM shares were the best performers in the Dow Jones Industrial Average last year, climbing 58 percent. In 2005, they tumbled 52 percent.
The shares fell 14 cents Tuesday to close at $29.77 on the New York Stock Exchange and have declined 3.1 percent this year.
© Copyright 2007 The Detroit News. All rights reserved.
GM to raise non-U.S. sales above 60%
Saturday, May 05, 2007
GM to raise non-U.S. sales above 60%
CEO Rick Wagoner says he hopes the increase doesn't come at the expense of domestic sales.
Greg Bensinger / Bloomberg News
General Motors Corp. plans to increase sales outside the U.S. to more than 60 percent of the company's total, as its domestic sales decline.
The automaker reached 60 percent in the first quarter because of increases in China and other emerging markets.
"That number is just going to continue to grow," Chief Executive Officer Rick Wagoner said Friday on a conference call from New York.
"I hope not by reducing our sales in the U.S."
GM may lose lead to Toyota
GM expects to sell 9.2 million vehicles worldwide this year, company sales analyst Paul Ballew said on the call.
It would be Detroit-based GM's highest total since 9.55 million in 1978.
That may not be enough to fend off a challenge for the annual global sales lead from Toyota Motor Corp., which has forecast sales of 9.34 million vehicles this year.
Toyota sold 2.35 million vehicles worldwide in the first quarter, beating GM's 2.26 million and threatening the U.S. company's 76-year reign as the world's biggest automaker.
GM hasn't had an annual sales gain in the U.S. since 1999 and got 55 percent of its total outside its home market last year.
The U.S. sales declines contributed to $12.4 billion in losses the past two years.
GM said first-quarter profit fell 90 percent to $62 million.
Markets outside the U.S. may eventually account for two- thirds of the company's vehicle sales, Ballew said.
Forecasting a record
"We will do well over 5 million units this year outside the U.S. market," he said. "That will be an all-time record for us." Last year, such sales totaled 4.2 million.
GM's sales in its Asia-Pacific region probably will rise to 1.5 million this year. Ballew said. The region's total last year was 1.26 million.
During the past six weeks, GM has "seen some softness in large-truck sales in the U.S.," mainly because of rising gasoline prices, Ballew said.
The company's large sport-utility vehicles have been most affected, he said. GM on May 1 reported April declines of 26 percent for the GMC Yukon large SUV and 12 percent for the similar-sized Chevrolet Tahoe.
GM's 8.375 percent note due July 2033 fell 0.44 cent to 91 cents on the dollar, yielding 9.3 percent, according to Trace, the NASD's bond-price reporting service.
© Copyright 2007 The Detroit News. All rights reserved.
GM ramps up truck discounts
Wednesday, May 09, 2007
GM ramps up truck discounts
Free financing, rebates offered for Chevy Silverado, GMC Sierra
Sharon Terlep / The Detroit News General Motors Corp.'s new full-size pickups just got a little cheaper.
The automaker, aiming to increase sales of its redesigned 2007 Chevrolet Silverado and GMC Sierra in a slumping pickup market, increased incentives on the trucks and for the first-time will offer zero-interest loans on new models.
New deals on the trucks let customers choose between free financing for up to 36 months or between $1,250 and $1,500 cash back on the 2007 models. The previous offer was reduced-rate financing and $750 to $1,250 cash back. Other offers are available on 2006 models.
The deals run through July 9.
In addition, dealers informed The Detroit News of two other unadvertised discounts on the trucks: Dealers can offer $1,000 in bonus cash on Silverado and Sierra models that have been sitting on dealer lots for 90 days or more; and they have the discretion to offer up to four $250 discount coupons to buyers of the new pickup.
GM is walking a fine line in the incentive battle, looking to stay competitive without abandoning its strategy of limiting discounts that cut profits and lower resale value.
"We've been tactical and strategic in how we're responding to the competitive action out there in the market place," GM spokesman John McDonald said. "We're seen a lot of incentive spending by our competitors."
GM has increased its share of the full-size pickup truck segment to 38.8 percent from 36.7 percent this year through April, despite intense competition that includes Toyota Motor Corp.'s first ever full-size Tundra pickup.
Overall, GM's full-size pickup sales are about flat this year to date through April.
While that's better than most competitors, the performance has fallen short of what both GM and analysts expected given that the trucks are completely new and heavily advertised.
"The good news is that although the industry is down overall, GM is up," said Jesse Toprak, chief economist for Edmunds.com. He said a double-digit gain should be the target with a new truck line.
The new Silverado and Sierra, launched late last year, have been well received by critics and the public. Even so, they're taking longer to sell than the outdated models they replaced, and are leaving showrooms with only a few hundreds dollars less in incentives.
Big pickup sales are suffering in the midst of a prolonged slowdown in the U.S. housing and construction markets. Truck sales depend heavily on contractors who use the vehicles for work.
Industrywide, full-size pickups, which account for 22 percent of vehicle sales for Detroit's automakers, were down 10 percent in 2006, according to Autodata Corp.
Sales for the segment were down another 5 percent for the first four months of 2007 compared with the same time last year.
Competition is intense, between Toyota's surprising incentives on the new Tundra and discounts as high as 20 percent on pickups from Ford Motor Co. and the Chrysler Group's Dodge Ram division.
McDonald said GM's internal numbers for the trucks, which account for two fewer selling days in April, show sales up 3.6 percent year to date.
"The bottom line," he said, "is that more people are choosing our trucks over our competitors."
You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.
© Copyright 2007 The Detroit News. All rights reserved.
Despite cuts, GM stuck in low gear
Friday, May 04, 2007
Despite cuts, GM stuck in low gear
Sharon Terlep / The Detroit News
General Motors Corp. has broken sales records, turned out critically acclaimed vehicles and shaved tens of thousands of workers from its payroll.
But all that progress couldn't save the automaker from another money-losing quarter in North America -- a stark reality that underscores GM's competitive disadvantages and why it desperately needs a money-saving labor deal this year with the United Auto Workers union.
GM on Thursday reported a $46 million net loss in its North American operations for the first quarter and a narrow $62 million profit on its global operations. The results fell 80 percent short of projections by investment analysts surveyed by Thomson First Call.
While the North American loss is a $246 million improvement from last year, it comes at a time when GM is benefiting from aggressive cost-cutting measures, a deal with the UAW to cut its health care tab and a dramatically smaller work force.
In addition, GM's re-energized product lineup is bringing in $1,000 more in revenue per vehicle sold in North America than it did just a year ago.
But those improvements continue to be overshadowed by GM's crushing labor and retiree costs.
"If you look at the cost burden we bear in this area versus international competitors, it's really massive," GM Chief Financial Officer Fritz Henderson said in an interview with The Detroit News. "Health care remains for us and for the industry a major source of competitive disadvantage. It diminishes margins, diminishes cash flow."
GM is working urgently to close its labor-cost gap with Japanese competitors. Company leaders have said cutting health care costs -- a $4.8 billion tab for GM in 2006 -- will be central to labor talks.
Henderson said GM will enter labor negotiations with the UAW this summer "with a high sense of urgency." The goal is to secure a new labor agreement when the current four-year pact expires in September.
A 2005 deal with the UAW helped. Under that agreement, which shifts more health costs to retirees, GM is saving $1 billion a year.
But GM says it needs more -- especially when it comes to retiree health costs.
GM estimates it spends $3.3 billion a year to insure retirees and dependents, a cost not shared by foreign competitors, which offer less generous post-retirement benefits and have fewer retirees.
UAW talks a 'key event'
In addition to draining the bottom line, health care costs divert money from new product development, GM said. The automaker's 2007 capital expenditures are expected to fall more than $5 billion short of what Toyota Motor Corp. spent last year.
"The absolute key event looking ahead is the negotiations with the UAW," said auto analyst John Casesa, of Casesa Shapiro Group. "That's what's weighing on investors right now. There is more riding on this contract than there has been in decades."
UAW spokeswoman Christine Moroski declined to comment Thursday.
Union leaders in recent months have talked to rank-and-file workers about the need to help Detroit automakers become competitive and the sacrifice that will entail. But while they're warning of difficult negotiations ahead, the union also has said it's not going to cave in just because times are tough.
Tony Perrucci, a member of the UAW Local 595 in Linden, N.J., questions whether labor costs weigh on GM as much as the automaker says. The company already has outsourced a great deal of work, he said.
"We have all been through this before," Perrucci said. "And ultimately many people will lose their jobs if GM has its way in the name of their so-called competitive efficiencies."
Besides the labor costs, a number of factors played into GM's less-than-stellar first quarter.
The faltering housing industry is partly to blame. Defaulted mortgages led to a $305 million first-quarter loss at General Motors Acceptance Corp., the lending company still partly owned by the automaker. Also, GM results last year were inflated by the $395 million sale of its stake in Suzuki Motors.
Revenue down from '06
GM's overall first-quarter revenue was $43.9 billion, down from $52.4 billion a year ago, although the company sold a record 2.26 million cars and trucks worldwide through March.
GM also has increased the cost estimate of a settlement with Delphi Corp., its former parts operation, to $500 million this year instead of $400 million.
"I was looking for considerably better from them," said analyst David Healy at Burnham Securities. "The numbers were disappointing."
During a conference call with analysts and reporters Thursday, Henderson was pressed to explain how GM posted a North American loss after making so many improvements from a year ago.
"You're in a good spot right now in your product cycle; mix is up," Rod Lache, an analyst at Deutsche Bank, said during the call. "And you're not quite where you need to be by your own acknowledgment."
Henderson wouldn't forecast whether GM would make money in North America in the second quarter, but he expects global auto operations to improve. Gas prices, the housing sector and the rollout of key products, including the redesigned Chevrolet Malibu, will be deciding factors, he said.
"We need to stick to our plans, stick to the cost cutting," he said. "Keep doing what we're doing."
One analyst called GM's improvement in North America "paltry," especially since it managed to increase its revenue per vehicle by $1,000 from a year ago.
"This seems like a weak year-over-year performance to us given we are at the peak of GM's product cadence and GM North America revenue per unit showed significant strength," Goldman Sachs analyst Robert Barry wrote in a research note.
Investors sent GM's stock price down $1.75, or 5.4 percent, to $30.69 in trading Thursday.
You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.
© Copyright 2007 The Detroit News. All rights reserved.
GMAC loss another bad sign for GM
Thursday, May 03, 2007
GMAC loss another bad sign for GM
Nation's poor housing market drags down home-lending unit; will impact GM earnings.
Sharon Terlep / The Detroit News
General Motors Corp.'s recovery effort took another blow Wednesday when GMAC, the lending company partially owned by the automaker, reported a surprising $305 million first quarter loss.
The loss, caused almost entirely by the nation's faltering housing market, will weigh on GM's first-quarter earnings to be announced this morning. GM sold a controlling interest in General Motors Acceptance Corp. last year to Cerberus Capital Management, but retained a 49 percent stake.
GMAC's loss was an $800 million reversal from a year ago, when it posted a $495 million profit in the first quarter.
"This was a disappointing quarter for us," said Sanjiv Khattri, GMAC executive vice president and chief financial officer. "We can not turn this business around soon enough."
GMAC's red ink alone typically wouldn't shake GM, but the automaker is likely to have a tougher time absorbing the loss in the midst of other challenges, particularly in its North American unit.
GM's new full-size pickups, a pillar of its strategy to return profits to North America, aren't selling as well as expected.
Auto sales industrywide are being affected by soaring gas prices, low consumer confidence and the poor housing market throughout the United States.
"Combined with everything else going on, it could be a bad day for GM," analyst Brad Rubin of BNP Paribas said.
In a sentiment shared on much of Wall Street, Morgan Stanley analyst Jonathan Steinmetz said in a research note that GM's auto business must deliver "better than expected" results for the first quarter if it's to meet expectations despite the GMAC hit.
After losing a staggering $10.5 billion in 2005, GM narrowed its losses last year to $2 billion. Its North American operations, though, remained in the red.
GM officials could not be reached on Wednesday.
One bright spot is that GM won't bear the entire brunt of GMAC's losses. This is the first full quarter in which GM's stake in GMAC is only 49 percent.
Through March, GMAC's home-lending unit, Residential Capital LLC, or ResCap, lost $910 million in the first quarter, compared with a $495 million profit in the first quarter of 2006.
The loss was largely due to defaulted mortgage loans made to high-risk borrowers, a trend that's shaking the lending industry.
GMAC's other businesses have been fairing better.
Its auto financing unit made $396 million, compared with $186 million a year ago. And the company's insurance business made $66 million, up from a $21 million loss a year ago. GMAC has taken several steps in recent months to decrease its exposure to the shaky subprime mortgage lending segment, Khattri said. He said ResCap likely will lose money in the second quarter, but significantly less than in the first three months of the year.
You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.
© Copyright 2007 The Detroit News. All rights reserved.
Despite cuts, GM stuck in low gear
Friday, May 04, 2007
Despite cuts, GM stuck in low gear
Sharon Terlep / The Detroit News General Motors Corp. has broken sales records, turned out critically acclaimed vehicles and shaved tens of thousands of workers from its payroll.
But all that progress couldn't save the automaker from another money-losing quarter in North America -- a stark reality that underscores GM's competitive disadvantages and why it desperately needs a money-saving labor deal this year with the United Auto Workers union.
GM on Thursday reported a $46 million net loss in its North American operations for the first quarter and a narrow $62 million profit on its global operations. The results fell 80 percent short of projections by investment analysts surveyed by Thomson First Call.
While the North American loss is a $246 million improvement from last year, it comes at a time when GM is benefiting from aggressive cost-cutting measures, a deal with the UAW to cut its health care tab and a dramatically smaller work force.
In addition, GM's re-energized product lineup is bringing in $1,000 more in revenue per vehicle sold in North America than it did just a year ago.
But those improvements continue to be overshadowed by GM's crushing labor and retiree costs.
"If you look at the cost burden we bear in this area versus international competitors, it's really massive," GM Chief Financial Officer Fritz Henderson said in an interview with The Detroit News. "Health care remains for us and for the industry a major source of competitive disadvantage. It diminishes margins, diminishes cash flow."
GM is working urgently to close its labor-cost gap with Japanese competitors. Company leaders have said cutting health care costs -- a $4.8 billion tab for GM in 2006 -- will be central to labor talks.
Henderson said GM will enter labor negotiations with the UAW this summer "with a high sense of urgency." The goal is to secure a new labor agreement when the current four-year pact expires in September.
A 2005 deal with the UAW helped. Under that agreement, which shifts more health costs to retirees, GM is saving $1 billion a year.
But GM says it needs more -- especially when it comes to retiree health costs.
GM estimates it spends $3.3 billion a year to insure retirees and dependents, a cost not shared by foreign competitors, which offer less generous post-retirement benefits and have fewer retirees.
UAW talks a 'key event'
In addition to draining the bottom line, health care costs divert money from new product development, GM said. The automaker's 2007 capital expenditures are expected to fall more than $5 billion short of what Toyota Motor Corp. spent last year.
"The absolute key event looking ahead is the negotiations with the UAW," said auto analyst John Casesa, of Casesa Shapiro Group. "That's what's weighing on investors right now. There is more riding on this contract than there has been in decades."
UAW spokeswoman Christine Moroski declined to comment Thursday.
Union leaders in recent months have talked to rank-and-file workers about the need to help Detroit automakers become competitive and the sacrifice that will entail. But while they're warning of difficult negotiations ahead, the union also has said it's not going to cave in just because times are tough.
Tony Perrucci, a member of the UAW Local 595 in Linden, N.J., questions whether labor costs weigh on GM as much as the automaker says. The company already has outsourced a great deal of work, he said.
"We have all been through this before," Perrucci said. "And ultimately many people will lose their jobs if GM has its way in the name of their so-called competitive efficiencies."
Besides the labor costs, a number of factors played into GM's less-than-stellar first quarter.
The faltering housing industry is partly to blame. Defaulted mortgages led to a $305 million first-quarter loss at General Motors Acceptance Corp., the lending company still partly owned by the automaker. Also, GM results last year were inflated by the $395 million sale of its stake in Suzuki Motors.
Revenue down from '06
GM's overall first-quarter revenue was $43.9 billion, down from $52.4 billion a year ago, although the company sold a record 2.26 million cars and trucks worldwide through March.
GM also has increased the cost estimate of a settlement with Delphi Corp., its former parts operation, to $500 million this year instead of $400 million.
"I was looking for considerably better from them," said analyst David Healy at Burnham Securities. "The numbers were disappointing."
During a conference call with analysts and reporters Thursday, Henderson was pressed to explain how GM posted a North American loss after making so many improvements from a year ago.
"You're in a good spot right now in your product cycle; mix is up," Rod Lache, an analyst at Deutsche Bank, said during the call. "And you're not quite where you need to be by your own acknowledgment."
Henderson wouldn't forecast whether GM would make money in North America in the second quarter, but he expects global auto operations to improve. Gas prices, the housing sector and the rollout of key products, including the redesigned Chevrolet Malibu, will be deciding factors, he said.
"We need to stick to our plans, stick to the cost cutting," he said. "Keep doing what we're doing."
One analyst called GM's improvement in North America "paltry," especially since it managed to increase its revenue per vehicle by $1,000 from a year ago.
"This seems like a weak year-over-year performance to us given we are at the peak of GM's product cadence and GM North America revenue per unit showed significant strength," Goldman Sachs analyst Robert Barry wrote in a research note.
Investors sent GM's stock price down $1.75, or 5.4 percent, to $30.69 in trading Thursday.
You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.
© Copyright 2007 The Detroit News. All rights reserved.
GM promotes three designers to new jobs
Wednesday, May 02, 2007
Auto briefs
GM promotes three designers to new jobs
DETROIT -- General Motors Corp. on Tuesday promoted Bryan Nesbitt, who helped create the Chrysler PT Cruiser, to vice president of design for North America as the automaker revamped design responsibilities worldwide. Nesbitt, 38, moves to the new North American post June 1 from executive director of design for GM's European operations, the automaker said Tuesday. GM named Mark Adams as design vice president for Europe and Kenneth Parkinson to the similar job for the Asia-Pacific region.
NHTSA investigates Jeep Commanders
U.S. regulators stepped up an investigation of DaimlerChrysler AG 's Jeep Commander sport utility vehicles after 495 complaints that the engine can stall during driving. The inquiry covers 2006 and 2007 models and affects as many as 136,444 of the SUVs, the National Highway Traffic Safety Administration said Tuesday on its Web site. The agency said the complaints included 445 reported to the automaker. Two cases involved crashes. NHTSA raised the investigation to an engineering analysis, the second step in its review process. The agency began its inquiry in February, with 50 complaints.
Jon Pepper leaves Ford for Hess Corp. post
Ford Motor Co. announced Tuesday that Jon Pepper, its director of global corporate communications, is leaving the company to become vice president of communications for Hess Corp ., an oil firm based in New York. Ford also named Ray Day executive director of global corporate communications. Pepper, a former reporter and columnist for The Detroit News, is expected to leave Ford on May 18 and will begin work for Hess in June.
Spartan reports $7.2M profit, to add 3 plants
Chassis-maker Spartan Motors Inc. reported record first-quarter earnings and sales Tuesday, and said it will add three manufacturing facilities. The Charlotte, Mich.-based company posted profits of $7.2 million for the first three months of 2007, up from $4.5 million a year ago. Sales were $143 million, compared to $103.7 million in the first quarter of 2006. Spartan said in a statement that its order backlog is up more than 37 percent, the largest in its history, prompting the addition of production capacity. However, the company, a leading supplier of motorhome chassis, said it does have concerns about the effect of fuel prices on the RV market.
Detroit News staff, wire and Bloomberg News reports.
© Copyright 2007 The Detroit News. All rights reserved.
Tahoe, Yukon debut hybrid versions
Wednesday, May 02, 2007
GM / GMC
The GMC Yukon gas-electric hybrid will improve gas mileage by 25 percent.
Tahoe, Yukon debut hybrid versions
Electric motors and gas engine power SUVs, with computer deciding which option is most efficient.
Scott Burgess / The Detroit News
MILFORD -- General Motors Corp. unveiled working versions of its large SUV hybrid Tuesday.
The Chevrolet Tahoe and GMC Yukon will offer the gas-electric hybrid by the end of the year, improving the vehicles' gas mileage by 25 percent, GM officials said.
"We're still in the development stages, but we're on track to have these vehicles ready by the fourth quarter of this year," said Larry Nitz, GM's executive director of hybrid technology.
The hybrid system powers the SUVs using electric motors (mounted inside the transmission), the gas engine alone or a combination, said Tim Grewe, GM's chief engineer for rear-wheel drive powertrain hybrids. Additionally, the electric motors can be locked out of the drive train during times the engine's power is needed, such as in towing up to 6,000 pounds.
Both models include a valve shutoff system that allows the 6-liter V-8 to operate on half of its cylinders to help conserve fuel when at cruising speed.
A computer monitors the entire system and determines every 1/100th of a second what method is the most efficient means to propel the vehicle, Grewe said.
When moving in slow traffic, the electric motors drive the car -- with the engine turning on only when needed or to help recharge the batteries. When the vehicle brakes, some of that energy is captured and returned to the 300-volt battery packs that are stored under the floor of the second row seats.
GM used a number of tools to improve the vehicle's gas mileage. Besides the hybrid system, it lightened the SUVs by more than 300 pounds. It replaced the hood and front tailgates with aluminum and changed the front fascia, side rails and back of the vehicle. It also redesigned the vehicle grille and made other improvements to make it more streamlined, said Mary Sipes, vehicle line director for full-size SUVs.
The insides of the Tahoe and Yukon closely resemble their gas-only namesakes.
In a short test drive, the Tahoe transitioned from electric to gas power during acceleration. Its handling was driven by its new electric power steering. In slow driving, the Tahoe could reach 25 mph without starting the gas engine.
A small gauge in the dash helps drivers know if they're saving energy or losing it through heavy acceleration or heavy braking.
Scott Burgess can be reached at (313) 223-3217 or sburgess@detnews.com.
© Copyright 2007 The Detroit News. All rights reserved.
Trucks hold back GM
Tuesday, May 01, 2007
Trucks hold back GM
Turnaround hurt as weak housing market, rising gas prices hit industry
Sharon Terlep / The Detroit News
DETROIT -- A slumping pickup market is hindering General Motors Corp.'s turnaround effort in North America just as the automaker was gaining momentum.
GM was counting on its new full-size GMC Sierra and Chevrolet Silverado pickups to be smash hits, but the new trucks launched late last year are taking longer to sell than the outdated models they replaced, and they're leaving showrooms with just $420 less in incentives.
GM sold 200,505 of the trucks through the first three months of 2007, according to Edmunds.com, a figure one GM insider said fell well below internal projections.
The impact of the sagging truck market will come into sharper focus this week as GM and other major automakers report April sales today and GM releases its first-quarter financial results Thursday.
The prolonged slowdown in the U.S. housing and construction markets, combined with rising fuel prices, is weighing on pickup sales nationwide -- a high-profit segment on which Detroit's automakers are heavily dependent.
"Things aren't falling apart, but those external factors are having an impact," Jesse Toprak, chief economist for Edmunds.com, said of GM's pickup sales.
GM officials declined to discuss truck sales, saying the automaker doesn't comment on sales and earnings ahead of announcements. Analysts expect GM to post a profit overall in the first quarter, but will be closely watching North American earnings for signs of progress.
GM hoped the high-profit Chevy Silverado and GMC Sierra would far exceed sales of the 2006 models that were running out of steam after a four-year run.
While the new Silverado and Sierra are generally outperforming the competition, they have been hurt by the down market.
GM increased Silverado and Sierra production 11 percent in the first quarter in anticipation of strong demand. But sales are up just 4.8 percent through March compared to a year ago, according to Edmunds.com.
Moreover, the trucks are being discounted $2,453 on average and are sitting on dealer lots 81 days, according to Edmunds' data for the first quarter of 2007. The old models carried $2,874 in incentives and moved in 55 days during the same period a year ago.
Considering the trucks were completely made over -- bigger, more powerful and available with more features -- GM and Wall Street were expecting more.
"Usually, you'd want to see a double-digit gain" on new products, Toprak said.
Automakers feel pinch
Troubles in the truck market have been looming for GM and other automakers.
The segment is heavily dependent on contractors who use the vehicles for work. As a result, demand has slumped with the housing market, as fewer workers build fewer homes.
Industrywide, full-size pickups, which account for 22 percent of vehicle sales for Detroit's automakers, were down 10 percent in 2006, according to Autodata Corp. Sales for the segment were down another 4.6 percent for the first three months of 2007 compared to the same time last year.
Toyota Motor Corp. surprised many in the industry by discounting its new full-size Tundra pickup months after it debuted.
Ford Motor Co. saw sales of its F-Series fall 14.1 percent in the first quarter of 2007, according to Autodata, following a year in which the Dearborn automaker's sales benefited from a post-Hurricane Katrina construction boom on the Gulf Coast.
"The housing market doesn't seem to be getting any better -- that is a concern," Ford sales analyst George Pipas said. "The prospects for a rebound are more remote today than they were four months ago."
Hopes were high
GM had hoped the new Sierra and Silverado, widely regarded as well-executed improvements on their popular predecessors, would offset some of those market forces. The automaker, like many in the industry, also was surprised by the depth of the woes in the housing market.
In the past couple of weeks, GM Vice Chairman Bob Lutz has made public statements reflecting concern about the impact the housing downturn will have on the auto industry.
But while the trucks have performed well -- their share of the large pickup segment increased nearly 4 percent -- they haven't delivered all GM hoped.
Research firm Global Insight is predicting that Silverado sales will be up 4.6 percent through April and Sierra sales will jump 5.9 percent.
And one analyst estimates GM's April truck sales fell 3 percent.
GM's U.S. sales in April may have dropped an adjusted 4 percent, falling as much as 7 percent for cars and 3 percent for trucks, Christopher Ceraso of Credit Suisse Holdings in New York said in an April 25 note. GM's large pickups "may struggle broadly given the weak housing market," the note said.
Truck competition heats up
The tough market forces come at a time of intense competition in the truck market. Toyota is out with the new Tundra. Nissan Motor Co. unveiled longer and heftier versions of its Titan truck. Ford's new F-Series Super Duty truck lineup hit showrooms in January. And both Ford and DaimlerChrysler AG's Chrysler Group are discounting their older pickups by up to 20 percent, Edmunds' Toprak said.
"They have sold more trucks in this weak market that they did last year," he said of GM. "At least that trend is positive."
Dealer Steve Cook, owner of the Cook GM Superstore in Vassar, is seeing the pickup problems firsthand.
"It's a competitive market and manufacturers are having a hard time getting people to feel it's a good time to buy a truck," Cook said.
You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.
© Copyright 2007 The Detroit News. All rights reserved.
GM's Wagoner Gets $10.2 Million in 2006 Total Pay
GM's Wagoner Gets $10.2 Million in 2006 Total Pay (Update4)
By Jeff Green and Greg Bensinger April 27 (Bloomberg) -- General Motors Corp., the largest U.S. automaker, said Chief Executive Officer Rick Wagoner's total compensation for last year was $10.2 million, as the company narrowed its loss.
Pay for Wagoner, 54, included $1.28 million in salary, $769,566 in other compensation, and stock options and awards valued at $6.67 million, the company said in a U.S. regulatory filing. Detroit-based GM also is proposing two new board members.
Wagoner's salary was 42 percent less than the $2.2 million he got for 2005, because of a 50 percent pay cut he agreed to in February last year. GM said today that Wagoner's salary for this year will be $1.65 million, restoring half of the cut.
``Maybe it's a little too early for a salary increase, but the automaker has made a lot of progress over the last year,'' said Mirko Mikelic, who helps manage $14 billion at Fifth Third Asset Management in Grand Rapids, Michigan, including GM debt. ``The union also made a lot of sacrifices so maybe it would be better for salaries to be flat going into negotiations'' that start in July for a new contract with the United Auto Workers.
The compensation details come three days after Wagoner learned that Toyota Motor Corp. had unseated his company as the global auto-sales leader in the first quarter, threatening GM's 76-year reign. GM's shares rose 58 percent last year, the most of any company in the Dow Jones Industrial Average. The company's net loss narrowed to $2 billion from $10.4 billion in 2005.
GM has shifted more of Wagoner's 2006 and future compensation from salary and direct pay to pay based on the company's performance, spokeswoman Renee Rashid-Merem said. About 83 percent of his 2006 pay was ``at risk,'' GM said in the Securities and Exchange Commission filing.
Proposed Directors
The automaker is proposing the election of new board members Errol Davis and Kathryn Marinello. Davis, 63, is chancellor of the Georgia state university system and a director of BP Plc, Union Pacific Corp. and PPG Industries Inc. Marinello, 50, has been CEO of Minneapolis-based Ceridian Corp., a provider of human-resources and payroll services, since October.
The SEC approved rules last year that require companies for the first time to provide a single figure for total compensation of their five top-paid executives and made other changes in the way stock options and stock grants are valued. The changes make it difficult to compare figures from the previous year.
GM a year ago reported Wagoner's total pay as $5.48 million for 2005, including stock options valued at $2.88 million. He hasn't gotten a cash bonus since 2004. Based on GM's adjustment to compare this year's options on the same accounting basis as last year's, his total 2006 compensation was about $4.88 million.
Stock Awards
GM disclosed March 22 that Wagoner received $2.8 million in restricted stock units this year, the first such grants since 2003, and 500,000 stock options. Those awards will be included in future compensation and aren't part of the filing today.
Shares at GM have risen 40 percent in the 12 months through yesterday and fell 89 cents to $31.56 at 4:21 p.m. in New York Stock Exchange composite trading.
Wagoner's 2006 total compensation is less than the $28.2 million that Ford Motor Co., the second-largest U.S. automaker, reported on April 5 for Chief Executive Officer Alan Mulally. Pay for Mulally, who took over at Ford in September after heading Boeing Co.'s commercial airplane business, included a $7.5 million hiring bonus and $11 million to make up for payments he would have gotten from the planemaker.
Lutz, Henderson
GM Vice Chairman Bob Lutz, head of product development, got $8.44 million in compensation, including $1.16 million in salary, GM said in the filing today. His 2007 salary, effective March 1, will be $1.32 million.
Chief Financial Officer Fritz Henderson, 48, received $5.19 million in compensation, including $1.16 million in salary. Henderson took over as the top financial executive in January. His 2007 salary will also be $1.32 million.
Lutz, 75, and Henderson agreed to 30 percent pay cuts in February last year. Salaries for Lutz and Henderson are still 15 percent lower than they were at the start of 2006.
Wagoner has promised to cut $9 billion from North American costs this year as part of a plan to close 12 North American locations and end losses. GM last year persuaded 34,400 union workers to either accept incentives to retire or leave.
The automaker's shares have fallen 54 percent since Wagoner took over as CEO in June 2000. Wagoner's salary was $2 million in 2001, his first full year in the top job. He got a raise to $2.2 million for 2003 and received that annual amount until accepting the pay cut last year.
GM's $12.4 billion in losses the past two years were its first consecutive annual losses since 1990 to 1992.
The company has sold assets totaling more than $17 billion to fund its restructuring plan. Wagoner hasn't forecast when GM will return to profit.
Wagoner and other top GM executives have been restricted from buying or selling GM shares since April 2005 when the automaker abandoned a profit forecast for the year. GM hasn't given financial forecast since.
To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net ; Greg Bensinger in New York at gbensinger1@bloomberg.net .
Last Updated: April 27, 2007 17:53 EDT
2007 Bloomberg LP
2007 Bloomberg LP
XM's Rogue Antennas Amplify Signals, Merger Scrutiny
XM's Rogue Antennas Amplify Signals, Merger Scrutiny (Update2)
By Christopher Stern
April 24 (Bloomberg) -- XM Satellite Radio Holdings Inc. became the nation's largest satellite broadcaster with a network of hundreds of antennas that were built and operated in violation of U.S. Federal Communications Commission rules.
At least a third of the 800 antennas that beam XM's radio channels to millions of customers were placed in unapproved locations or emitted signals that were too strong, according to a review of FCC filings. XM says some now comply with the rules, though it doesn't know how many.
The misplaced antennas may result in fines or a shutdown of part of the company's network. Lawmakers including U.S. Representative Edward Markey say regulators should take the violations into account when they consider XM's plan to combine with Sirius Satellite Radio Inc.
``This series of apparent violations by XM does provide fuel to opponents of the merger and gives them reason to think they can get the deal rejected,'' said Paul Gallant, a Washington-based policy analyst with Stanford Washington Research.
Sirius and XM need approval from the FCC and Justice Department for their all-stock combination, worth $3.42 billion at today's closing prices.
The extent of the breach hasn't been widely disclosed by XM. The company told shareholders on Feb. 22 in a Securities and Exchange Commission filing that ``certain'' antennas had unapproved locations or power without giving further details, and said that the FCC had begun an investigation.
`Administrative Problems'
XM Chief Executive Officer Hugh Panero told investors on a Feb. 26 conference call that while ``clearly there were mistakes or administrative problems,'' the FCC isn't likely to force the company to make changes that would affect customers. The company is ``just working with'' the FCC to find a solution, Panero said.
``XM voluntarily disclosed these variances to the FCC, took unilateral action to eliminate many of them, and continues to work directly with the FCC to address any concerns,'' XM spokesman Chance Patterson said. The differences between the approved and actual locations or signal strength are ``generally immaterial,'' he said.
XM depends more on its ground-based network than Sirius, whose satellites give better coverage. Sirius Chief Executive Officer Mel Karmazin told Congress last week that 11 of the company's 138 antennas violated rules and that he switched them off in October.
Four Hearings
Lawmakers have no direct authority to block the merger, though they might influence the outcome by making their feelings known. Congress has held four hearings on the proposed combination at which legislators raised concerns over issues including XM's violation of FCC rules.
Shares of XM fell 20 cents to $10.93 at 4 p.m. New York time in Nasdaq Stock Market trading. They've dropped 22 percent since the purchase by Sirius was announced. Sirius shares were down 3 cents at $2.77 and are down 25 percent since the announcement.
The two companies ran afoul of the FCC last year, when the agency said they were selling radios with signals that were too strong. Sirius and XM pulled the radios off the market temporarily while they were fixed.
XM uses antennas, or repeaters, to boost signals where buildings or hills block reception from orbiting satellites. The unapproved repeaters are dotted throughout 59 markets including Los Angeles, New York and Chicago, Washington-based XM said in an FCC filing in January.
42 Percent
In the filing, XM said the antennas in violation serve 42 percent of its network. In Los Angeles, 23 of XM's 39 antennas are in breach of the rules, the company said. In New York, 35 of 91 are.
XM said in December filings that turning off Los Angeles repeaters would have a ``drastic and adverse impact'' on reception and a New York shutdown ``would devastate'' service.
Some antennas were erected thousands of feet from their approved location, said XM, which has 7.5 million subscribers. In Chicago, an antenna was more than 11 miles from the authorized spot. In Austin, Texas, a repeater sanctioned for a height of 490 feet was 900 feet high.
Consumer groups including the Consumers Union and the National Association of Broadcasters, the trade group for broadcasters that provide free radio, said the violations show why the companies shouldn't be allowed to combine.
``Given their repeated lack of candor in dealing with the FCC, it is astonishing that XM and Sirius would now seek a government-sanctioned monopoly,'' said Dennis Wharton, spokesman for the broadcasters' group. FCC spokesman David Fiske declined to comment.
Raising Doubt
XM's failure to follow FCC rules indicates it may not live up to Karmazin's promises that the combined company will offer consumers more choice and lower prices, said Markey, who chairs the House Telecommunications and Internet Subcommittee.
``What is the expectation it will follow through or fulfill any public interest conditions?'' Markey, a Massachusetts Democrat, said in an e-mailed statement.
XM committed the violations as it raced against Sirius to begin service in 2001 and sign up customers. The two have racked up combined losses of more than $6.4 billion in five years as they built their networks. Annual sales at XM grew from $20 million to $933 million in four years. Sirius had revenue of $637 million.
The companies say the merger won't stifle competition because of the availability of alternative providers of entertainment and information such as Apple Inc.'s iPod as well as high-definition and traditional radio.
To contact the reporter on this story: Christopher Stern at and cstern3@bloomberg.net
Last Updated: April 24, 2007 16:27 EDT
2007 Bloomberg LP
Wagoner paid $10M despite GM losses
Saturday, April 28, 2007
Wagoner paid $10M despite GM losses
Sharon Terlep / The Detroit News
DETROIT -- General Motors Corp. CEO Rick Wagoner earned $10.2 million in 2006, a year in which the automaker continued to lose money and market share but managed to trim billions in losses.
In his seventh year leading GM, Wagoner received $1.28 million in salary, down from $2.2 million in 2005, the company said in a U.S. regulatory filing. Wagoner's salary for this year will increase to $1.65 million.
His other 2006 compensation included $6.67 million worth of stock options and awards and $769,566 in other compensation, according to a filing on Friday with U.S. regulators.
The 54-year-old CEO, who's spent three decades working for GM, made $5.5 million in 2005 and $10 million in 2004. However, GM noted that changes in accounting rules last year mean his 2006 compensation should not be compared with previous years. If Wagoner's compensation were calculated under the old rules, he would have made $4.8 million in 2006, GM said.
GM also said the majority of Wagoner's compensation was tied to future performance.
The decision to cut the base salaries of Wagoner and other top executives came last year after Jerry York, a top aide to billionaire investor Kirk Kerkorian who later joined the GM board of directors, publicly urged GM to cut its executive pay.
GM's Chief Financial Officer Fritz Henderson, 48, and Vice Chairman Bob Lutz also took pay cuts, bringing each of their base salaries to $1.32 million.
Overall, Lutz, 75, made $8.4 million last year, including his salary, $2.93 million in stock options and awards and $445,679 in other compensation. Henderson made $5.2 million in total compensation.
Wagoner's 2006 compensation was a little more than one-third of the $28.2 million Ford Motor Co.'s new president and CEO Alan Mulally earned during his first four months on the job.
Last year was a critical one for GM, which debuted a string of well-received new vehicles and cut $9 billion in costs, but continued to burn cash and cede market share to Japanese rivals.
For the first time in 76 years, GM this week lost its claim to being the world's largest automaker when Toyota Motor Co. surpassed GM in sales for the first quarter of 2007.
But Wagoner's relentless drive to cut costs has played well on Wall Street. GM's shares rose 58 percent last year, the most of any company in the Dow Jones Industrial Average.
Executive pay has emerged as a hot-button issue as Detroit's struggling automakers have looked to the United Auto Workers union for concessions in tough times.
A little more than a year ago, GM, in a show of shared sacrifice to UAW leaders, halved its dividend, capped health care benefits for salaried retirees and slashed the pay of Wagoner and other top executives and directors.
"He's got a tough job and he should be well compensated," said Brad Rubin, an analyst at investment firm BNP Paribas. "But the UAW is going to be very disappointed considering all the concessions and givebacks they're providing."
GM lost $2 billion in 2006, a more than $8 billion improvement compared to its restated $10.4 billion loss in 2005. The automaker is in the midst of a sweeping restructuring plan that includes slashing more than 34,000 jobs and closing 12 plants.
In a letter sent earlier this week to top executives, Wagoner acknowledged frustration with being passed by Toyota, but said the company's overall strategy is a good one.
"What's important is that we stay focused on implementing our business strategies around the globe," he said. "Because they are working."
Wagoner and other top GM executives have been restricted from buying or selling GM shares since April 2005 when the automaker abandoned a profit forecast for the year. GM hasn't given a financial forecast since.
The automaker is proposing the election of new board members Errol Davis and Kathryn Marinello.
Davis, 63, is chancellor of the Georgia state university system and a director of BP Plc, Union Pacific Corp. and PPG Industries Inc. Marinello, 50, has been CEO of Minneapolis-based Ceridian Corp., a provider of human-resources and payroll services, since October.
Bloomberg News contributed to this report. You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.
© Copyright 2007 The Detroit News. All rights reserved.
