GM CEO calls pay cuts 'fair'

He calls lower compensation a 'tough' decision

David Shepardson / Detroit News Washington Bureau

Washington -- General Motors Co. President and CEO Fritz Henderson said Wednesday the Treasury Department's decision to cut his salary 25 percent, and those of other GM executives, was "tough" but "fair."

Henderson, who was on Capitol Hill meeting with key members of Congress about potential legislation to reverse dealer closings, offered his first extensive comments on pay cuts ordered by Treasury. He also spoke about comments President Barack Obama's former auto czar made about the Detroit automaker recently.

"We thought it was fair. It was tough, but the situation was tough," Henderson said in an interview with The Detroit News and the Associated Press, referring to Treasury special master Kenneth Feinberg's ruling on GM's pay for its top 25 executives.

"(Feinberg) has a very tough job," Henderson said. "I thought he was focused on retaining people but also aligning people (with) the shareholders."

Henderson called the ruling "well-structured. It was from my perspective -- me owning the stock -- I like it. We're not public yet, but we will be and if we do our job that stock is going to have real value. The fact that I am aligned (with the company's performance) is absolutely the right thing to do."

Henderson will see his cash salary fall by about 25 percent to $950,000, down from $1.26 million. He will be eligible for "stock salary" grants that he can't cash in for two years and then just one-third per year. He also will be eligible for long-term restricted stock compensation of $1.8 million, but only after GM repays its government loans. In total, Henderson could eventually receive $5.445 million in pay for 2009.

GM's pay for its top 25 execs will fall by 31 percent for salaries and 20.4 percent in total compensation.

Henderson also said critical comments on the old GM's operations by former Obama administration auto adviser Steve Rattner had some merit.

"There was a lot of truth in it, and you have to take that to heart and you got to internalize it and say how do you change? We went bankrupt. We've got to change," Henderson said. "There were some things I didn't necessarily agree with -- but that's not the point. The point is how do we change to be successful."

Rattner said last week that GM needed an "amputation" and sharply criticized the company's finance operations and culture.

Henderson said he wasn't involved in talks between the Treasury Department and GMAC to pump up to $5.6 billion in additional capital into the finance company. A healthy GMAC "is very critical" to GM and Chrysler, Henderson said.

GMAC provides most of GM's auto lending and provides financing to Chrysler Group LLC dealers and customers.

GM and Chrysler have been widely criticized for shuttering more than 2,000 dealers as part of their reorganization and Henderson was in Washington to try and state the company's case. Chrysler closed 789 dealerships in June during its bankruptcy reorganization, and GM plans to close 1,350 by late next year.

"We've been involved in dialogue here in Washington with the dealers. It is certainly our objective to find a solution in a nonlegislative way," he said.

He met earlier with Transportation Secretary Ray LaHood on a number of fronts, including environmental and safety issues.

LaHood said after meeting separately with the CEOs of all three Detroit companies, he is confident they will succeed.

"I think the American car manufacturers are back -- I really do. I am very encouraged," LaHood said, adding that he said he told President Barack Obama of his optimism.

Meanwhile, GM is preparing to disclose that it is drawing about $2.5 billion from unused government loans in escrow to pay off obligations related to Delphi Corp.'s bankruptcy exit, a person familiar with the matter said.

GM is expected to outline the Delphi transaction -- and other financial steps-- in a securities filing due out by Friday.

GM agreed earlier this month to help fund the Troy-based auto supplier's exit from bankruptcy.

GM has resisted disclosing how much it has in escrow-- believed to be more than $10 billion-- after its own exit from bankruptcy earlier this year.

dshepardson@detnews.com (202) 662-8735