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General Motors CEO Mary Barra will take home one-third less in compensation for at least six months.
GM’s 69,000 other salaried workers will defer 20% of their cash compensation for six months, the company said Thursday.
The pay cuts, albeit temporary, start April 1. They are intended to help the automaker get through the coronavirus pandemic that’s stalled the U.S. economy.
“This is a significant step to reduce cash burn during a crisis when we have very little revenue coming in,” said GM spokesman Jim Cain. “We can hopefully avoid layoffs and keep the team together so when we come out of this crisis we can accelerate our business really quickly.”
White-collar workers will get their pay back, with interest, in a lump paycheck in the fourth quarter and no later than March 15, 2021. GM’s salaried employees make up 42% of its global workforce, so the savings is meaningful, Cain said. Analysts agree it’s a smart move.
“They don’t want to lay people off so deferral is the next option,” said David Whiston, equity strategist for U.S. autos at Morningstar Research Services. “Right now it’s all about survival and getting factories open. They can’t open factories probably until at least mid-April so with no revenue they need to find ways to cut expenses.”
GM’s senior executives will take an additional 5% pay cut on top of the 20% cash compensation deferral for a total of 25% deferral and pay cut, Cain said.
The highest paid officers of GM will take an added 10% pay cut on top of the 20% deferral for a total of a 30% deferral and pay cut.
GM’s board of directors will also take a 20% reduction in compensation.
GM is not releasing a dollar amount of savings from the cuts, but Cain characterized it as “significant.”
This news comes two days after GM said it will draw $16 billion from its revolving credit facilities as a proactive measure to boost its cash reserve. That will give GM financial flexibility because of the uncertainty in global markets.
GM is expected to have $15 billion to $16 billion in cash at the end of March, so the added money will serve as a supplement.
In 2018, CEO Mary Barra’s salary was $2.1 million, unchanged from 2017, according to SEC filings. She is one of the 20 highest-paid CEOs in America. For 2018, Barra’s total compensation was $21.87 million — about 281 times as much as GM’s median employee’s compensation of $77,849. GM has not yet filed the executive compensation proxy for 2019.
More: GM CEO Mary Barra’s compensation was $21.87 million in 2018, 281 times median GM worker
Also, GM said 6,500 salaried workers who were unable to work remotely during the pandemic will stay home and transition to a leave of absence rather than be laid off and have to collect unemployment.
These salaried employees will receive 75 percent of their pay while on leave. The most affected employees in this group are salaried workers who work in GM’s plants or in engineering jobs, Cain said.
GM’s news comes the same day that Ford Motor Co.’s CEO Jim Hackett notified all employees in writing that the company would defer 20-50% of the salaries of the top 300 executives from May 1 through Oct. 1. Executive Chariman Bill Ford is deferring his entire salary during that time.
Also, Ford will stall employee merit raises as part of a push to strengthen Ford’s financials and prevent job cuts amid the virus crisis.
“Given Ford announced this too, it’s not surprising to see GM do something similar,” said Whiston.
More: Ford warns employees of pay freeze for executives, other possible cuts
Contact Jamie L. LaReau at 313-222-2149 or jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter.
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