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Would You Give This Guy $2.2 Million?




At a time when many folks across America are tightening their belts, squeezed between rising costs and declining income and benefits, General Motors CEO Rick Wagoner has some celebrating to do.

The executive had to get by on a miserable $1.3 million last year, a pay cut enacted in the face of the automaker’s $10 billion loss. Now, with most signs suggesting GM is on the mend, Wagoner’s paycheck is being restored to his earlier $2.2 million, the same amount he made between 2003 and 2005.

That might come as a shock to the workers who recently voted to accept sharp cutbacks – including a first-ever, two-tier wage structure that will, going forward, cut in half, to $14 an hour, what tens of thousands make.

On the other hand, one could argue that Wagoner has achieved something of a miracle. A few years ago, it was hard to find a product in the GM portfolio that serious skeptics could rave about. Now there are plenty, including the new Chevrolet Malibu, which recently was named North American Car of the Year, by a panel of 50 U.S. and Canadian autowriters.

That contract I mentioned will save GM billions, eliminating about two-thirds of the cost gap between the U.S. maker and the so-called “transplant” assembly lines run by its import rivals. Overall, under Wagoner, GM expects to have achieved, by year’s end, about $9 billion in annual cost savings. Even without the new contract, its productivity was approaching that of Toyota. And quality is on the rise, as well, the picky Consumer Reports magazine putting the Chevy Silverado back on its Top Picks list, the first time a Big Three product has landed there in several years.

But even so, GM continues to lose money. In fact, it set a record in 2007, with a $38.7 million deficit. The vast majority of that came through accounting changes and one time charges – otherwise, it would have been a reasonably manageable $23 million loss – but it was still the third year in a row of red ink, however you parse the numbers.

So, does Wagoner deserve the big money he’ll take home this year – along with the stocks and bonuses promised for meeting various targets? Or should he have been up for another, even bigger pay cut?

That’s something Detroit insiders will likely debate for some time, but perhaps there could’ve been another way to handle this. Just consider what’s happening over at Aflac, the Columbus, Georgia health insurer best known for its quacking duck commercials.

Like many top American executives, CEO Donald P. Amos has heard plenty of complaints, over the years, about management pay. He’s offered up the same sort of defenses used to justify Wagoner’s $2.2 million, and the $20 million former Chrysler Chairman Lee Iacocca made after the company turned itself around, in the early 1980s.

This time, however, Amos is betting his proposed pay on his own track record. At Aflac’s annual meeting, in May, the insurer will become the first publicly-traded American company to give investors a chance to vote on a CEO’s compensation. Officially, it’s a non-binding vote, but who expects the Aflac board to refute the results of this landmark vote.

How would Wagoner fare if he put his own paycheck to the shareholders? We’d bet he’d come out fine. In fact, he might get even more. A couple years ago, everyone seemed to be calling for his ouster, but these days, though GM is still in the red, Wagoner is generally seen as one of the best leaders in the industry. So maybe it wouldn’t be a bad idea for the former Duke basketball star to test public reaction. It would be another sign that GM is doing the right stuff.
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Comments (20)
  1. This a very small salary for a ceo, but this article doesn't mention that this guy has probably 10 of millions in stock options !!!
     
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  2. This is just another example of a CEO being rewarded for incompetent and substandard performance. One example. How many BILLION DOLLARS did GM have to pay Fiat for the put options a while back? Many GM products are have quality issues.
    If I were a GM stockholder I would be livid! Only in America.
     
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  3. The article fails in many respects. What has GM done under a team of managers is take on the world and do quite well. The writer is asleep at the wheel by not registering the year 2007 as GM's second best selling year....ever. 1st best selling was in in 1970's. GM now sells "many" more cars outside US than inside and leads in all but about 3 out of 20 major countries for auto sales. GM reach is stronger globally than ever with double digit sales increases in 3 of the 5 major markets worldwide for 2007. It remained the largest selling car maker by selling 100k's of more cars overseas. The article ignores options for GM management. The article ignores the hefty signing bonus for Ford's Mujally (spelling). The article ignores how GM is trying in 2008 to buyout other high paid workers to replace them with lower paid workers and match employee compensation with J compensated workers here in the US. Clear reason is good management doesn't overpay for the work performed. 2.2 million is cheap salary for the level of responsibility that GM's team has shouldered during the past 5 years. GM did not lose $38.7 million, it was $38.7 billion. GM, did not lose it in cash, most writers can't understand the high importance of this point. Given the above how do we improve on this article?
     
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  4. The article fails in many respects. What has GM done under a team of managers is take on the world and do quite well. The writer is asleep at the wheel by not registering the year 2007 as GM's second best selling year....ever. 1st best selling was in in 1970's. GM now sells "many" more cars outside US than inside and leads in all but about 3 out of 20 major countries for auto sales. GM reach is stronger globally than ever with double digit sales increases in 3 of the 5 major markets worldwide for 2007. It remained the largest selling car maker by selling 100k's of more cars overseas. The article ignores options for GM management. The article ignores the hefty signing bonus for Ford's Mujally (spelling). The article ignores how GM is trying in 2008 to buyout other high paid workers to replace them with lower paid workers and match employee compensation with J compensated workers here in the US. Clear reason is good management doesn't overpay for the work performed. 2.2 million is cheap salary for the level of responsibility that GM's team has shouldered during the past 5 years. GM did not lose $38.7 million, it was $38.7 billion. GM, did not lose it in cash, most writers can't understand the high importance of this point. Given the above how do we improve on this article?
     
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  5. I wonder why Mr. Wagoneer is still there if he's "only" getting 2.2 million. I've read articles stating that the average CEO makes 365 times as much as the labor does for a given company (I've read other articles stating that figure is as high as 540 and that in the eighty's the # was more like 80). So if the new workforce is getting a minimum of $14 per hour that translates to approximately $28000 per year. Multiply that by 365 and you get just over $10 million. There has to be a pretty hefty financial incentive for Mr. Wagoneer to stick around that's not being mentioned in the article.

    Also Henry Ford stated "There is one rule for industrialists and that is: make the best quality of goods possible at the lowest cost possible, paying the highest wages possible." I wonder if GM (and the rest of the industry) has interpreted that rule to apply only to executive pay.
     
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  6. Rick is underpaid for what he's accomplished and for his enormous level of responsibility. Who's overpaid? Athletes who make many multiples of his salary, and have no responsibilty whatsoever.
     
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  7. He's done a great job, I'm very much dismayed by the fact that my 01 Cadillac dts no longer has onstar. It' not fair to someone like me who has owned Cadillacs for thirty years to be deprived of Onstar. Mr. Wagoner should get his engineering mavens to come up with an adapter to convert anolog to digital. Consumer agencies should protest that Onstar was a selling point in 01 and entered into the decision to spend over $50,000. on my car.
    I feel that I've been needlessly shafted and I think that the Cadillac division of GM has an obligation to rectify my sorry plight.
     
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  8. As a GM dealer with two GM franchises, I would say that Rick is worth every penny, if not more. We are very lucky to have him and the team that he has assembled. Just wait another year and it will be very apparent to all why GM under Rick Wagners leadership is one of the best auto companies to be associated with.
     
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  9. GM is still F'ed up.

    If GM made $500 million in profit after the write offs I would agree with the $2.2 million.
     
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  10. I have to agree with PLW, Paul really dropped the ball on this one.
     
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  11. Give him the same package as he is dealing to the factory workers.
    Only don't hire him back at half his current salary.
    He is an under performing employee.
    GM loss the number one stop during his watch.
    Fire the coach.
    Come on people, open your eyes.
    Some of you would buy a Chinese roller skate as long as it had GM nameplate.
     
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  12. Rick and Super Star Bob Lutz are worth much more. They're righting what was ship that was listing.... If you have a Football or Baseball Team that is in bad shape, you bring in a good Mgt Team and pay for excellent talent to make it a winner again. Rick is running the business, Bob is making cars people want again, Cowger is making sure they get built right, and Henderson is handling the Finances (and now Operations). Rick doesn't have an easy job, none of these guys do. 25 years from now, we'll have a better perspective, but the car business is not for wimps.
     
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  13. Oh, one other thing, idiot actors get $20 million to make a movie nobody sees, plus percentages of the profits. These guys are responsible for building cars that safely transport our families, and employing tens of thousands of people. They should benefit more when the turnaround is producing more tangible revenue, and handsomely at that.
     
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  14. As a 38 year GM veteran, I am glad that we have leaders like Wagoner & Lutz who are motivated by more than just the money. If you compare executive compensation, you will find that tiny companies (relative to GM) such as Bell & Howell and Black & Decker pay their CEOs much more than Wagoner got. The predicament of GM (& Ford & Chyrysler) is representative of the larger decline in American competitiveness vis-a-vis offshore competitors. We lost cameras, watches, radios. televisions, motorcycles and on and on over decades. The new labor agreement combined with a product renaisance make the future look much better, but it has and will take time to work back to solid profitability. We still have the challenge of the fuel economy standards which kind of "ban" the only vehicles which we have been able to make any money on, trucks and SUVs.
    Those who make statements like "he should get what the UAW workers got" are ignorant of the fundamental fact the salaried employees and executives compensation is controlled by supply and demand. If the compensation is inadequate, they will go elsewhere. This is in contrast to the demand for compensation by a monopolistic union with the threat of a strike to back up the demand. People who are capable of doing the work are lined up around the block to get those jobs for $14/hour, which is still more than our competition pays.
     
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  15. GM has made enormous strides under Rick. By CEO standards, a modest raise. As head of one of the largest enterprises on earth, he earned it.

    Want to ask the crowd this question again? Let's have everyone weigh in on Dick Dauch and the truckloads of cash he took home during the salad days at AAM. Can he honestly say he prepared his orgainization for the reality it faces today?
     
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  16. The simple fact is that we've got a driveway full of BMWs and Audis yet when I add up the product on the market that I would consider buying today (or the stuff I'd recommend to others) half of it is GM.

    I wouldn't have said that five years ago.

    GM is a giant that's got one leg shackled to its past bad decisions (on product, labor, etc.) but it is making headway.
     
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  17. Good for Rick, he has his and will get more. Well done for the share holders, not do good for the employees who will not fare so well, it is a tough market and The Wagon has rolled on,, the global factor is huge a a risk Mr.Wagoner is willing to take to make GM profitable in the world market...this is a much smaller stage we are getting ready to tear apart, the American dream is no longer a reality at the concessions the suits are asking of their work force, we can be competitive without destroying the working class. I want Rick to make GM prosperous but not at my expense. Our priorities are a little out of sync with reality and the division gets larger and larger leaving more laborers in a hard spot. Look at Ohio and Michigan job loss, how can that be good for our economy? Is there no middle ground?. I don't we are looking very clearly at the BIG picture and many, many people have helped R.W. stay on top with our labor,so yes Rick does deserve to make good money to turn GM around, we should not have to lose for suits to win and this is still the United States of America, not Chimexipan and unless all those who are parting out our jobs for profit understand this how can We the People survive?
     
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  18. DanDetroit, bet you made more than 14 bucks an hour, bet you still are and I know you are not in touch with reality if you think it is alright to sell out your families future, Rick and Bob have done wonderful things for us and will continue to do so regardless of our bantering back and forth, the issue is not really Rick or Bob wages, it's about sustaining and maintaining a profitable work force here in America and with our hard earned wages(labor/manufacturing) to be able to buy the products we make. We to want our children to go to the best colleges, have good medical benefits mostly we want a future. Why is it always labors fault when things get rocky?
     
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  19. val elliott: Hey Val, its called Global competition. BMW is moving more production to SC because labor costs in Germany are higher, and scales with Euro/Dollar are better for the company. Companies exist to make money not employ people. If companies pay you $70.00 an hour but the same priced car is made elsewhere for $20.00 an hour guess which company makes more money... duh... If $14.00 an hour doesn't cut it, go back to school, improve yourself, or start your own business. I'll bet you'd rather pay your employees $14 vs $70 per hour now wouldn't you?

    The key part of this is: Company's don't exist to employ people, its to make money.
     
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  20. xjug1987: another consideration for BMW, et al is looming EU CO2 regulation, which may cripple their EU business and push much of their production out of Germany.
     
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