GM CEO Suffers Fed Freeze
While spring is in full freeze, things are looking decidedly chilly for General Motors (NYSE: GM) CEO Alan Akerson. GM recently has a salary cap placed on executive pay by the federal government, and that has resulted in a freeze on Akerson's $1.7 million salary.
GM hardly has any cause to complain. It has only been four years since the government was practically forced to bailout the company. While results have been improving since then, there are still a lot of out-of-work auto workers in Detroit and beyond who will be thinking that $1.7 million per year is enough for anybody.
That figure is deceiving anyway, as Akerman earns an estimated total of $9 million per year ($1.7 million salary, $5 million in stock and $2 million in restricted stock). The CEO succeeded Edward Witacre in September and, since then, has done a stellar job of putting GM back on the right path. Record profits and a resurgence of almost-epic proportions has been the order of the day.
However, it should not be forgotten that the federal government still owns roughly 26.5% of GM stock, and GM still owes the U.S. government about $25 billion.
That is why the fed has no qualms about throwing its weight around. As well as freezing Akerman's salary, the treasury Department has frozen, or limited, the compensation packages of around 25 of the company's highest paid executives for this year. In fact, the treasury recently said that executive pay has dropped 12% from 2011 to this year. Again, that seems fair.
One would imagine pride would dictate that GM executives would be happy with that, but rather, overpaid execs are throwing their toys out of the crib. The company has warned of the risk of regular executive turnover if the fed continues to implement the salary freezes and limits. Apparently, these guys cannot live on $1.7 million. The rest of Detroit, particularly those still looking for work following the 2008 fallout, looks on incredulously.
GM is not the only company being made to watch the pennies. AIG still owes $50 billion in taxpayer money, and Ally Financial owes $12 billion. Both are subject to compensation limits. Plus, GM hardly had the best March with Deutsche Bank saying that GM's sales rose by 7.8% (vs. an easy comp.); well below our 16.7% estimate. March market share of 16.5% (and Q1 share of 17.6%) represented a large variance vs. our 18.75% full year estimate (FY2011 was 19.7%).
"While truck seasonality and new products should drive this higher in 2H12, we are losing confidence that GM will achieve our full-year share forecast."
Still, Akerman will look at the money earned by other top level auto executives and grimace. Ford's (NYSE: F) Alan Mulally earned $29.5 million in 2011, while Chrysler/Fiat man Sergio Machionne pulled in $22.2 million.
Whichever way you look at it though, GM is a company that was heavily bailed out by the government and it still has some way to go before that damage is repaired. A salary increase at this point would surely be highly immoral.
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