It didn't take long for Jerry York to make an impact atCorp.
York, who represents Tracinda Corp. and billionaire owner and GM stakeholder Kirk Kerkorian, was named to the GM board of directors in February, replacing E. Stanley O'Neal, CEO of Merrill Lynch & Co. Inc.
GM outlined several new cost-cutting moves, seemingly following a proposed game plan York initially laid out in a speech he gave in Detroit in January. Among the actions:
- Cuts in health-care benefits for salaried retirees in the U.S. Contributions to salaried retiree health care will be capped at 2006 levels. When average costs exceed the cap, policy changes — such as hikes in co-pays and deductibles — will be made effective with the start of the next calendar year. GM says the reductions will reduce its liability by $4.8 billion and slash its annual health-care pre-tax expense by almost $900 million.
- Cuts in pension benefits for salaried workers. GM is evaluating how to restructure the pension plan.
- A 50% reduction in the cash dividend. GM's board approved a $0.25 per share dividend. GM has paid $0.50 per share per quarter since first-quarter 1997.
- Salary cuts for Chairman and CEO Rick Wagoner and other top executives. Wagoner will take a 50% pay cut, while salaries for vice chairmen John Devine, Bob Lutz and Fritz Henderson will be reduced 30%. Executive Vice President and General Counsel Thomas Gottschalk will take a 10% pay cut.
- A 50% reduction in compensation paid to outside board members. Non-employee board members will forgo their cash compensation but retain some of the stock portion of their annual retainer, GM says.
Wagoner calls the moves “difficult actions to take, but necessary.” And while he says they are not meant to send a message to the United Auto Workers union, he doesn't rule out seeking additional wage concessions from hourly workers.
Wagoner also downplays the impact of York's January message, saying many of the measures being undertaken were in discussion long before that.