posted 02-07-2006 09:32 PM         

The struggling automaker said it is also revising health care benefits for salaried retirees and will restructure its U.S. pension plan for U.S. salaried employees. The automaker plans to cap contributions for salaried retiree health-care at 2006 levels beginning Jan. 1, 2007. GM said when average costs exceed established limits after 2006, additional costs will be shifted to retirees in the form of higher monthly contributions, deductibles and other means.

The changes are expected to reduce GM’s long-term health care liability by $4.8 billion and cut the automaker’s annual health-care liabilities by about $900 million.

The dividend cut will save GM about $565 million annually. The automaker’s dividend has not been reduced since 1993.

"These are difficult decisions that involve sacrifices by our employees, stockholders, retirees, and the senior leadership team," GM Chairman and Chief Executive Officer Rick Wagoner said. "However, we are confronting a 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 for the long term."

Wagoner’s salary will be reduced by 50 percent. He was paid a base salary of $2.2 million in 2004 and 2003. His 2005 salary will be disclosed in April.

The salaries of GM vice chairmen John Devine, Bob Lutz and Fritz Henderson will be trimmed 30 percent. Devine and Lutz received base salaries of $1.55 million in 2004. Thomas Gottschalk, executive vice president and GM’s general counsel, will see a 10 percent cut in his salary. His 2004 salary was $950,000.

Moody’s Investors Service called the moves “constructive elements of the company’s efforts to support its turnaround.” However, the credit rating firm said additional steps, including further restructuring costs related to GM’s North American turnaround and a potential cash contribution to assist in the reorganization of bankrupt supplier Delphi, may be needed.

GM, battered by high fixed costs and slumping sales in North America, lost $8.55 billion last year and is losing an estimated $24 million a day. It plans to close 12 North American plants and facilities, and shed 30,000 factory jobs by 2008. The cuts, along with other steps, will save about $7 billion.

Today’s moves follow several recommendations made last month by Jerome York, an aid to GM investor Kirk Kerkorian. York, who was named to GM’s board of directors on Monday, has called on the automaker to cut the dividend, reduce senior management salaries, and shed brands such as Saab or Hummer.

York has also called on GM management and the United Auto Workers to address the automaker’s long-term health care and pension obligations. Some GM shareholders have also pressed management to end the practice of paying laid off UAW factory workers, as well.

In October, the UAW agreed to concessions that require hourly retirees to cover a greater portion of their health care coverage.

UAW leaders have repeatedly called on GM shareholders, executives and others to sacrifice as well.

Wagoner said GM continues to work with the union on addressing competitiveness issues, but said today’s announcement was not intended to send a message to the union. GM and the union will renegotiate wage and benefit contracts in 2007 and the company is expected to press for additional health care concessions.

“In my experience, we make the most progress in sitting down and working face-to-face,” Wagoner said during a morning news conference at GM’s headquarters in Detroit.

Analysts said the latest restructuring moves may give the company additional leverage at the bargaining table in 2007.

“The UAW will only make concessions in proportion to the severity of GM’s fundamental situation, not based on GM’s board composition, or other factors,” Goldman Sachs analyst Rod Barry said in a report.

“Shareholders have already borne the brunt of GM’s woes in the form of a $19.4 billion decline in equity market cap over the last two years,” Merrill Lynch analyst John Murphy said.

At mid-day, GM shares were down 14 cents at $23.20 in New York Stock Exchange trading.