GM’s board met yesterday as pressure grew to drastically cut the shareholders’ dividend. The move – now confirmed – is largely symbolic: it sends a message to the UAW that shareholders have to take a hit also.
Go deeper with GlobalData
An official announcement from GM confirming the dividend cut came on Tuesday (February 7th). GM said it was cutting its yearly dividend to US$1 a share – that is a reduction of 50%. That will reduce the yearly shareholders’ payout by US$565 million. GM is also planning reductions to salaried worker retirees’ health and pension benefits.
“These are difficult decisions that involve sacrifices by our employees, stockholders, retirees and the senior leadership team,” GM Chairman and CEO Rick Wagoner said in a statement.
“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.”
As part of the changes, Wagoner will take a 50% pay cut. Vice Chairmen John Devine, Bob Lutz and Fritz Henderson will see their salaries reduced by 30%, and Executive Vice President and General Counsel Thomas Gottschalk will take a 10% cut.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataIn addition, there will be no annual or long-term cash bonuses paid to GM’s global executives for 2005 performance.
Yesterday’s board meeting saw billionaire investor Kirk Kerkorian’s holding company win a seat on the board.
Jerome York, a consultant to Kerkorian’s Tracinda Corp. will serve on the GM board’s public policy and investment committee, GM said.
“Jerry brings years of business experience and knowledge of the automotive industry to the GM board,” said Rick Wagoner, GM chairman and chief executive officer. “We are pleased to welcome him to our Board.”
Tracinda, which is the personal holding company of Kerkorian, owns some 9.9% of the common stock of GM.
Tracinda recently boosted its stake back up to 9.9% after selling GM shares in December for a tax loss.
Kerkorian’s interest in GM has sparked speculation that he intends to force through changes at the world’s biggest auto company, which has been steadily losing money and market share in the United States.
York has warned recently that GM has only about 1,000 days of cash left and needs to change and change dramatically.
He has also called for a cut in the company’s dividend, reductions in executive salaries and the elimination of brands.
