No raise for GM salaried workers in ’11

December 11, 2010

No raise for GM salaried workers in ’11

Akerson called on feds to give more leeway in setting executive pay

The Detroit News

General Motors Co.’s 26,000 salaried employees won’t get raises in 2011, even though the automaker is making money this year, and CEO Daniel Akerson wants “greater flexibility” in compensating top executives.

As part of its massive bailout of the banks, GM and Chrysler Group LLC, the government capped the pay of their executives. But in a speech to the Washington Economic Club on Friday, Akerson said that policy has hindered GM’s ability to attract top talent, and driven some employees to companies without pay restrictions.

“We’re starting to lose some of those key people to elsewhere,” he said.

Hours later, Akerson met with the Treasury Department’s Pat Geoghegan, who is overseeing executive compensation at bailed-out companies. Akerson wouldn’t elaborate on the visit, but a Treasury spokesman said Geoghegan “routinely meets with executives on these matters.”

By holding firm on white-collar pay, Akerson said, GM is trying to “lead by example.” The company will negotiate a new contract with the United Auto Workers union next year, and continues to closely watch its bottom line.

GM says its white-collar pay already is on par with other companies, the result of a pay bump this year. The automaker declined to disclose the amount of that increase, but GM spokesman Tom Wilkinson said it brought salaries in line with others in the business.

The “no raise” news for salaried workers came as the GM Foundation announced Friday it was giving $27.1 million — the largest grant in its 34-year history — to the United Way of Southeastern Michigan to help improve graduation rates at Metro Detroit schools.

The foundation, too, has tightened its belt in recent years, but gradually is ramping up charitable spending again with a strong focus on education, said Mark Reuss, GM’s North American president and a member of the foundation’s board. While it shares the automaker’s name, the foundation has its own money and is a separate entity, Reuss said.

GM is on track to end the year in the black, its first yearly profit since 2004.

Akerson, who becomes board chairman Jan. 1, said Friday the automaker was truly humbled by its “near-death experience.” As part of its post-bankruptcy restructuring, GM shed plants, brands and workers and embarked on new design, manufacturing and marketing strategies.

Additionally, the company cut pay for salaried workers as it headed into bankruptcy last year; that reduction was restored in late 2009, said Wilkinson.

“Although the new GM has made significant progress, the auto business remains extremely challenging, and it is important that we control costs in every area of our business,” he said.

Next year’s pay freeze only pertains to a worker’s base salary — not any incentive pay tied to the company’s performance. GM will decide on incentive pay when it closes its financial books at the year’s end, Wilkinson said.

Ford Motor Co. and Chrysler also have scaled back pay increases for salaried workers over the last two years. Chrysler did not grant “broad-based” white collar raises this year, but it didn’t cut or freeze pay when the Auburn Hills-based company collapsed into bankruptcy last year, said spokeswoman Shawn Morgan.

Chrysler, too, was sustained with a government bailout and like GM, had cut expenses and its workforce. Morgan declined to comment on the company’s pay plans for next year.

Ford gave salaried employees a pay increase this year, but announced previously that it had suspended incentive bonuses that would have been paid out this year and last, said spokeswoman Marcey Evans. Ford was the only one of Detroit’s Big Three to forgo a government bailout.

In declining to give out white collar raises, GM could be laying the groundwork for next year’s UAW contract talks, where the automaker likely will seek pay concessions from hourly workers, said Harley Shaiken, a professor at the University of California, Berkeley, who closely follows the UAW.

“This is fairly traditional,” Shaiken said.

“When GM wants to make a point in the years of negotiation, they often impose that point on salaried workers first.”

Even so, the tactic doesn’t always work and GM’s performance in 2011, along with economic conditions, will carry more weight in next year’s negotiations, Shaiken added.

Compensation expert David Lewin, a management professor at the University of California, Los Angeles, said a pay freeze is typically a “stringent measure” but at GM, it should be viewed within the broader context of the industry’s struggles.

“They’ll probably get some pushback,” Lewin said. “But as some folks like to say, this is the new GM, not the old GM, and there are bigger issues on the horizon.”

Nor was Lewin surprised at Akerson’s urging for more executive pay flexibility. Many other companies have picked off talent from Detroit’s Big Three over the years.

“Top executives always like to claim any pay restriction is going to hurt their search for talent,” he said. “In the case of GM, there is some truth to that.”

Even so, Reuss said Friday GM has recruited some top talent without the lure of a big paycheck. In the past year, it’s had some notable hires, including Joel Ewanick, its new vice president for U.S. marketing.

“There are a lot of people here that want to make the company work without money,” Reuss added.

“But at some point, there are people that do show up with money, so you have to address that.”

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