Ford and GM CEOs to work for $1

by Rachel Nixon | December 2, 2008 at 10:38 am

494 views | 45 Recommendations | 8 comments

The CEOs of troubled automakers Ford and GM are offering to work for a $1 salary as they present their plans to cut costs to Congress.

The firms are trying to secure $25 billion in emergency federal loans as a result of the financial crisis and plummeting car sales.

The company announced that the salary of Ford CEO Alan Mulally would be cut to $1 a year if Ford (F, Fortune 500) actually borrowed money from the government. When Mulally appeared before the House Financial Services Committee last month, he did not agree to the suggestion of such a paycut.

A spokesman for General Motors (GM, Fortune 500) confirmed to CNN that CEO Rick Wagoner also will accept a $1 salary. Other details of GM's turnaround plan were not immediately available. Chrysler LLC CEO Robert Nardelli agreed during Congressional testimony last month he would also agree to a $1 salary in return for federal help.

Mulally had a base salary of $2 million and total compensation of $21.7 million last year, according to the company's filings. Wagoner received base pay of $1.6 million and total compensation of $14.4 million. Closely-held Chrysler does not disclose executive pay.

The Detroit Three automakers were presenting their plans to Congress on Tuesday to restructure their firms and give assurances that the bailout they are seeking will help them survive.

Ford is seeking a $9 billion bridging loan in case of financial difficulties, but said that it hoped to turn a profit - or break even - by 2011.

Ford also said it would sell its five corporate jets as part of its cost-cutting plan.

Other measures could include selling some businesses, such as Swedish carmaker Volvo.

Ford said a $14bn investment was needed in new technologies in the next seven years in order to improve fuel efficiency.

But it is also seeking an emergency bridging loan from the US government in case it got into financial difficulties.

"Ford is asking for access to up to $9bn in bridge financing, but reiterated that it hopes to complete its transformation without accessing the loan should Congress agree to make the funds available," the carmaker said in a statement ahead of a hearing in Congress.

Having faced criticism for flying their corporate jets to Washington for their last appearances in which they requested loans, the CEOs of the three companies are travelling to the US capital by more modest means later this week.

This time, GM Chief Rick Wagoner will drive a company car to Washington instead of flying by corporate jet as he seeks a government bailout, a spokesman says.

Wagoner will drive in a Chevrolet Malibu hybrid sedan when he makes the 520-mile trek from Detroit to Capitol Hill, General Motors Corp. spokesman Tony Cervone said Tuesday.

Ford Motor Co. CEO Alan Mulally also is traveling by car from Detroit for his second appearance before two legislative committees as the Detroit automakers seek $25 billion in government loans. Chrysler LLC CEO Robert Nardelli will not travel by corporate jet. A spokeswoman says his travel plans will remain secret for security reasons.

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mazevedo

at 11:33 on December 2nd, 2008

These next few days will be very interesting to follow, as the faith of the big 3 detroit automakers are at stake! Great Article!

Roberto Alvarez-Galloso

at 12:17 on December 2nd, 2008

Great article.

turbomonkey

at 15:49 on December 2nd, 2008

If you've been following the industry, you'd realize that at least Ford and GM have positioned themselves well for the future. The cars in their pipelines are the sorts that many have been complaining. Personally I'd prefer to see independent investors bail them out rather than the government, but based on the fine products that companies are now selling(if you don't agree you're not paying attention) and are planning to sell in the near future, they without a doubt deserve to take their shot.

Erik Larson

at 16:14 on December 2nd, 2008

a step in the right direction; and if they're getting public funds, it should all be paid back before they get a penny of any performance compensation. Detroit and big oil are big reasons the electric car got killed, and why the Ford Ka (38 mpg) isn't sold in the US. People who make such horrendous, short-sighted and destructive decisions probably shouldn't be in charge of changing their own underwear, let alone a major corporation that influences US domestic and foreign policy.

Jennings David L

at 16:32 on December 2nd, 2008

So they are now willing to give up their jets after congress outted them at their last capitol hill meeting. I too am skeptical of their offer of $1 salary, how gullible do they think people are? With the millions they have stashed and their golden parachutes they could go ten years on $1 a year. I would be more impressed if they would forgo their pension.

Emilio Lizardo

at 18:24 on December 2nd, 2008

This is all just more cosmetic politics ...

21 million bucks, or whatever Mulally's salary is, is just lunch money for these guys !

The real question, and practically speaking the only question is - can these companies reach the goal of making vehicles which people will want to buy ?

To my personal knowledge they have been claiming to have pursued this objective for at least the last 20 years, and we all can plainly see how effective they've been so far ...

Maybe a better way to state the operative question is - Will the 34-billion the Big-3 are currently asking congress for be the magic elixer that finally cures them of their corporate psychoses ?

Jon Azpiri

at 18:48 on December 2nd, 2008

It looks like more details about the Big Three's plan have been revealed:

General Motors asked Congress for a loan of $12bn (£8bn), with an additional $6bn if necessary, to help it survive.

Ford meanwhile requested a $9bn (£6bn) bridging loan, which it hopes it will not need.

Chrysler sought $7bn to survive the dramatic slump in sales that has decimated its cash reserves.

In its submission, GM said that, if the loan was granted, it would draw on $4bn this month before beginning repayments in 2011.

It said it would continue its efforts to develop more fuel-efficient vehicles - including an investment of $2.9bn in alternative fuels - and cut costs, levels of debt and top executives' pay.

This would include reducing its workforce considerably by 2012.

GM also pledged to reduce its chief executive Rick Wagoner's annual salary to just $1.

Ford boss Alan Mullaly made a similar pledge, but only should it need to call on the emergency loan.

Ford also said it would sell its five corporate jets as part of its cost-cutting plan, and proposed other measures including selling some businesses, such as Swedish carmaker Volvo.

It said a $14bn investment was needed in new technologies in the next seven years in order to improve fuel efficiency.

"Ford is asking for access to up to $9bn in bridge financing, but reiterated that it hopes to complete its transformation without accessing the loan should Congress agree to make the funds available," the carmaker said in a statement.

It added that it expected to return to profit, or at least break even, by 2011.