Two Years In A Row Top GM Execs Will Not Recieve Cash Bonus

DETROIT April 17, 2003; Michael Ellis writing for Reuters reported that General Motors Corp.'s top executives will receive no cash bonus for their performance last year, the world's No. 1 automaker said on Thursday, as concerns about the shaky economy outweighed the sterling results they delivered in 2002.

It was the second straight year that GM denied its top officers a cash bonus.

The executives also received no additional long-term incentive bonus because GM's stock price underperformed the broad market over a three-year period.

By most measures, GM posted a stronger year in 2002 as earnings, excluding one-time items, nearly tripled to $1.7 billion. For the first time in 26 years, GM posted a consecutive annual rise in its U.S. market share, and the automaker also moved ahead in independent reports on vehicle quality and manufacturing productivity.

"The 2002 performance for General Motors was well beyond our own expectations and, you could argue, even beyond the (Wall) Street's expectations," said GM spokesman Jerry Dubrowski. "(However), the senior managers looked at the current economic environment, and they said they felt they should receive no cash compensation for 2002."

Instead, the top GM executives will receive restricted shares to be paid out when the officials retire or leave the company, according to a filing with the U.S. Securities and Exchange Commission (News - Websites). GM Chairman Jack Smith retires in June.

Dubrowski said the restricted shares give the executives more equity in the company's performance, and align their interests with those of other shareholders.

WEAK STOCK PRICE

Despite GM's successes, its stock price fell about 25 percent last year. So far this year, GM's U.S. market share has dropped and the weakening market threatens GM's ability to fund its rising pension and healthcare costs.

On Tuesday, GM warned that it may not meet its 2003 earnings per share target of $5 due to the wobbly U.S. economy and competitive pricing pressures such as high incentives.

"Despite our progress, we know that there's plenty more to do," GM Chief Executive Officer and President Rick Wagoner said in a letter to shareholders released on Thursday.

GM said Smith, in his last full year as chairman, received 55,000 restricted shares, which the company currently valued at $2.2 million, in addition to his salary of $1.025 million.

Chief Executive Officer and President Rick Wagoner, who will also take over the duties as chairman in June, received 125,000 restricted shares, currently worth $5 million. His salary was unchanged at $2 million.

Vice Chairmen Bob Lutz and John Devine both received 75,000 restricted shares, currently worth $3 million, and both had a salary of $1.45 million.

Lutz and Devine, who made their initial mark in the auto industry with GM rivals, both received a long-term restricted stock options that were part of their contract when they signed with GM years ago. Lutz received options valued at $1.39 million and Devine got options valued at $703,000.

OTHER COMPENSATION

The executives also received additional compensation, such as use of corporate airplanes, savings plans and life insurance policies.

In January and February last year, the top executives also received stock options based on the company's improved performance in 2001, and to keep the officials within a range of long-term incentives granted by competitors.

The restricted stock options were valued at $40.05 each, based on the average high and low value of the share on the date of the grant. GM shares have dropped since the beginning of the year, and were trading at $35.31 in midday trade on the New York Stock Exchange (News - Websites) on Thursday.

GM also paid $156 million last year to Deloitte & Touche, up from $102 million in 2001, for auditing and consulting services. The bulk of the higher fees -- $44 million of the $54 million rise -- was from GM's Hughes Electronics Corp. unit.