GM CEO Whitacre flying on AT&T jets

March 8, 2010

GM CEO Whitacre flying on AT&T jets

His contract with ex-employer offers lucrative plane perks

The Detroit News

General Motors Co. dumped its corporate jets last year while in bankruptcy after being berated by lawmakers in late 2008 for flying top executives to Washington to ask for a bailout.

But Chairman and CEO Edward Whitacre Jr. still flies private, thanks to a little-known perk negotiated with his former employer, AT&T Corp., before he joined GM in 2009.

Whitacre, 68, negotiated a lifelong deal with the telecommunications giant before he retired in 2007 with a $158 million package that allows him to fly, free, on AT&T corporate jets for up to 10 hours a month. That’s the equivalent of two round-trip flights between his home in San Antonio and his apartment in Detroit. The perk costs AT&T, where Whitacre was chairman and CEO, about $20,000 a month, according to a filing with the U.S. Securities and Exchange Commission.

The perk is a potential image problem for AT&T and GM, which was rescued by more than $50 billion in taxpayer money, corporate compensation experts said.

The benefit should be suspended until Whitacre leaves GM, according to management and executive compensation expert David Lewin, a professor at the Anderson School of Management at the University of California, Los Angeles.

"It’s more than a perception problem. If I was an AT&T shareholder or executive, I’d put up a stink about this," Lewin said.

Whitacre’s pay package at GM is valued at about $9 million, including an annual salary of $1.7 million. The automaker said he does not use AT&T planes for GM business.

Jet used ‘at his discretion’

"It’s something he uses at his discretion," GM spokesman Chris Preuss said. "If he’s using it to commute to and from San Antonio, I don’t know. How Ed chooses to get to and from San Antonio is the same as how I get to and from Northville. It’s my prerogative how I get to work and how he gets to work."

An AT&T spokeswoman would not say how often or for what purpose Whitacre uses the company’s aircraft.

A GM source told The Detroit News that Whitacre has used the jets to shuttle between Texas and Michigan.

AT&T spokeswoman McCall Butler said Whitacre has "a limited number of hours to use AT&T aircraft for personal use within the U.S. He may very occasionally use his personal hours for travel that includes Detroit." She declined further comment.

Lewin said it is difficult to determine how widespread the perk is across corporate America because most companies don’t disclose the information. But it would be hard to argue that Whitacre is using AT&T aircraft only for personal use given the consuming duties of a corporate chairman and CEO, he said.

"When you are a CEO," Lewin said, "you can’t, or it’s difficult, to separate your private life."

Peter Kaufman, a New York investment banker who represented dissident bondholders in GM’s bankruptcy, said from a "public relations" perspective, "this would play better if GM was actually making something of itself. Corporate perks are looked at very differently when a company is knocking the cover off the ball than when you’re on the public dole."

The government owns a 60.8 percent stake in GM, which gave up seven corporate planes and its leased hangar at Detroit Metropolitan Airport. Eliminating the jets was a condition of receiving federal aid.

Whitacre’s use of corporate jets could be perceived as a questionable practice given GM’s financial troubles and the government’s stake in the automaker, said Samuel Bernstine, a Newcastle, Pa.-based partner with consulting firm Kepner-Tregoe Inc.

Seeking to avoid ‘barriers’

"On the other hand, given the role he plays and the decisions that need to be made worldwide, you want this guy to be working 24/7, within reason," Bernstine said. "You want him focused on where he needs to be, when he needs to be there, and you don’t want transportation as a barrier."

AT&T also agreed to pay Whitacre up to $26,000 a year, for life, for an automobile.

GM’s top execs are allowed to charter flights in North America when a "clear business rationale is stated" and to fly business class on all flights, according to the automaker’s luxury expense policy.

During its stint in bankruptcy last year, Chrysler LLC terminated leases for two aircraft. Ford Motor Co. voluntarily scrapped its corporate jet fleet following Congress’ criticism in late 2008 when the CEOs of Detroit three automakers flew corporate jets to Washington to appeal for aid.

That year, Ford spent $344,109 on personal use of company and private aircraft for CEO Alan Mulally, according to a regulatory filing. He now flies charter aircraft.

Chrysler CEO Sergio Marchionne gets around bankruptcy rules because he is paid by Chrysler partner Fiat SpA, where he also is CEO and not subject to pay caps and other regulations.

He uses Fiat jets so there is no cost to Chrysler for frequent travel between Auburn Hills and Fiat headquarters in Turin, Italy."> (313) 222-2028

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