GM halves dividend, cuts executive salaries

DETROIT - General Motors has halved its dividend, its first cut in more than 13 years, and slashed executive pay in a move to reduce costs and gain union support for sweeping, long-term changes in its labour contracts.

The board of directors -- which had been under pressure to make the moves from billionaire investor Kirk Kerkorian, GM's largest single shareholder -- cut the dividend to an annual rate of US$1 ($1.48) a share, reducing the payout by US$565 million a year.

The salary of GM chairman and chief executive Rick Wagoner will be halved, while vice chairmen John Devine, Robert Lutz and Fritz Henderson will see their salaries cut by 30 per cent.

The world's largest carmaker lost US$8.6 billion in 2005 as it struggled with high labour and raw material costs, loss of US market share to foreign rivals, and sluggish sales of sport utility vehicles, its biggest generator of profits.

"Cuts like this were important to negotiations with the unions for similar types of cuts in unionised pay structure," said Tim Ghriskey, chief investment officer of Solaris Asset Management.

The announcement follows Monday's appointment of Jerome York, Kerkorian's chief adviser, to GM's board.

Last month, York called on GM to cut its dividend as part of a turnaround. He also urged shedding "noncore" brands such as Saab and Hummer, and reducing senior management pay.

Kerkorian increased his stake in GM to 9.9 per cent in January and said he might buy 12 million additional shares if GM met his demands.

GM did not specify what the 2006 salaries of its top executive would be. In 2004, the latest year for which figures are available, Wagoner received a salary of US$2.2 million and a bonus of US$2.46 million, plus stock options worth US$5.14 million. Lutz received total compensation of US$6.46 million, and Devine US$6.28 million, including salaries of US$1.55 million and bonuses of US$1.4 million.

- REUTERS