GM's Lutz: Auto Execs Are 'Way' Underpaid

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http://detroitnews.com/article/20100213/AUTO01/2130305/1148/GM-s-Lutz--Auto-execs-are--way--underpaid

U.S. limits on salary for carmaker's top 25 may hurt recruiting, he says

Robert Snell / The Detroit News

Orlando, Fla. -- General Motors Co.'s top 25 senior executives, whose pay packages are being reviewed by the Treasury Department, are "way, way, way" underpaid, GM Vice Chairman Bob Lutz said Friday.

His comments came as Treasury officials review 2010 pay for GM executives, whose salaries must be approved by the agency's pay czar, Ken Feinberg. That's because GM is among companies that received billions in federal money under the $700 billion Troubled Asset Relief Program.

The executives' compensation is expected to include GM stock, which might start being sold to the public late this year. If the stock appreciates, top executives could be in for a windfall.

But right now, those salaries are lagging the market, Lutz said in an interview with The Detroit News on the sidelines of the National Automobile Dealers Association annual convention, which begins in earnest today.

"What you see is what you get, and it ain't a lot," said Lutz, keynote speaker at a roundtable Friday. "All I know is, right now, we are given our responsibility. And given the rigors of the job and demands and the accountability, I would say we are being paid way, way, way below market."

The topic of executive pay drew criticism several weeks ago amid reports of Wall Street chief executives at JPMorgan Chase & Co. and Goldman Sachs Group Inc. receiving multimillion-dollar bonuses.

President Barack Obama recently defended those bonuses, saying he "doesn't begrudge success or wealth."

"Lutz is playing a bit of politics here. If Obama comes out and says he's fine with all these guys making serious bucks, it kind of leaves it open for Lutz to do that," said auto analyst Joe Phillippi of AutoTrends Consulting Inc. in Short Hills, N.J. "I don't think Feinberg or whoever else is involved is going to take Lutz's remarks and penalize him or the company" because he complained about it.

Lutz has a point about low pay hurting GM's ability to recruit talented executives at a time when Korean automakers are hiring Americans to lead their North American operations, he said.

As an example, GM's search for a chief executive, which ended last month with Chairman Edward Whitacre Jr. taking the job, failed to net serious candidates.

'Numbers aren't there yet'
GM has gained market share and posted sales increases, but executives do not merit being rewarded yet, Phillippi said.

"If they manage to execute the turnaround they think they can and post the kind of numbers they think they can, they should be well-rewarded for it. But, "the numbers aren't there yet," he said.

Lutz's comments baffled industry consultant Maryann Keller.

"If you are in a situation where your very existence is determined by the largesse of the government, I'm not sure you have a whole lot to say about what your compensation should or shouldn't be," said Keller, head of Maryann Keller & Associates in Stamford, Conn.

The Treasury Department, which is finalizing the pay package of Whitacre, owns 61 percent of the automaker and invested $50 billion in GM. Treasury spokeswoman Meg Reilly said Friday the talks between GM and the Treasury over Whitacre's pay package were ongoing.

Feinberg had ordered a 25 percent pay cut for then-GM CEO Fritz Henderson to $950,000 in October. He resigned under pressure Dec. 1 and was replaced by Whitacre, who also is chairman of GM's board of directors.

Whitacre's pay eventually will be disclosed in a voluntary Securities and Exchange Commission filing. He left as CEO of AT&T in 2007 with a $158 million retirement package.

Problem looming
Feinberg ruled in October that salaries for GM's top 25 executives would drop by 31 percent, while total compensation would decline 20.4 percent. Just one other executive in GM's top 25, beyond the CEO, was to earn more than $500,000 in cash.

"Right now, that isn't a problem, but over time, clearly a company that undercompensates senior executives is going to have a retention or recruiting problem," Lutz said.

Since Feinberg set pay limits last year, GM has hired a new chief financial officer, Chris Liddell, who will be paid in $750,000 plus stock awards. Special adviser Steve Girsky is being paid $1.1 million for sitting on GM's board of directors and for advising Whitacre. His pay includes $200,000 a year as a director and a monthly grant of salary stock valued at $75,000, or $900,000 a year.

The pay limits for GM's top executives are understandable considering the firm's stay in bankruptcy court last year, Lutz added.

"You can't go through Chapter 11 and come out the other side and expect to have all of the same perks and comps as you did before," he said. "We just hope it doesn't stay this way too long."