GM, unlikely to hit margin target, revises bonus

DETROIT, March 12 Reuters reported that General Motors Corp. acknowledging that it is unlikely to meet its 5 percent net margin goal, said on Tuesday that it has revised a bonus plan for 3,500 of its top executives to refocus on cutting costs and improving cash flow.

``It doesn't mean that we're giving up on the net margin target,'' said GM spokesman Jerry Dubrowski. ``It's just unlikely that we can achieve it by 2003. We're doing that because we want to better align the incentives with the financial objectives we have for the company.''

GM Chief Executive Officer Rick Wagoner unveiled the 5 percent net margin goal in September, 2000 before a meeting of about 3,000 company executives as part of his drive to boost profitability, speed up decision-making and streamline operations.

The bonus would be paid out if the world's largest automaker achieved a net margin of 5 percent over any four quarters before the end of 2003.

At the time he unveiled the plan, U.S. auto sales were in the midst of a record-setting year, and GM's net margin for the most recent quarter was 3.6 percent.

But U.S. sales have slowed, competitive pressures have increased, and GM recorded a net margin of just 0.6 percent in the fourth quarter last year. Still, that was better than Ford Motor Co. and DaimlerChrysler AG's Chrysler operations, which both recorded staggering losses last year.

The co-called Net Margin Program has been replaced with a new incentive program called the Leadership Challenge Grant, which has structural cost reduction and cash generation targets, Dubrowski said. He declined to specify the targets, but GM Chief Financial Officer John Devine has said that GM aims to cut structural costs by $1.5 billion this year to offset rising pension fund obligations for its numerous retirees.

Dubrowski said the new targets will help GM achieve its $10 per share earnings objective by mid-decade.