Delphi CEO cuts salary but keeps $3 million bonus...
by TFSnewsRoom/BloombergNews.com
Delphi CEO cuts salary but keeps $3 million bonus
By JEFF BENNETT
Bloomberg News
10/18/2005
Delphi Corp. Chief Executive Steve Miller, criticized by a union for increasing executive severance plans, said he will cut his salary to $1 a year from Jan. 1 until the auto-parts maker exits bankruptcy.
Company President Rodney O'Neal will take a 20 percent reduction in base pay, and about 20 executives will accept cuts of 10 percent, the Troy, Mich.-based company said Monday. Miller said that he will keep a $3 million signing bonus that he got when he joined Delphi in July at an annual salary of $1.5 million and that the severance changes will remain.
Delphi, the largest U.S. auto-parts maker, lengthened severance-payment plans for top executives to 18 months from 12 months just before its U.S. operations filed for bankruptcy on Oct. 8. Miller sought court protection after failing to get financial aid from former parent General Motors Corp. and union concessions including pay cuts of as much as 64 percent.
"It is a symbolic gesture and it sets a tone and a mood that this is serious and this company is in such bad shape that it can't afford to pay me what it agreed to pay, let alone you, the rank-and-file person," said James McTevia, a former auto-parts executive and founder of consulting firm McTevia & Associates in Eastpointe, Mich.
The United Auto Workers union, which represents about 25,000 of Delphi's U.S. employees, on Oct. 8 called the severance changes a "disgusting spectacle of the people at the top taking care of themselves at the same time they are demanding extraordinary sacrifices" from workers.
Delphi and the UAW are still in talks that Miller on Monday called "constructive."
Miller said on the conference call Monday that he won't scrap the severance changes because executives have already given up a lot. Delphi in an Oct. 7 filing said the previous plans were "not competitive."
"The Delphi management was given a $34 billion corporation and they ran it into the ground," said Clyde Sims, chairman of UAW Local 913 at the company's ball-bearing plant in Sandusky, Ohio, referring to annual revenue when GM spun off the supplier in 1999. "They don't deserve any more compensation. In fact, they should take a bigger cut than what they're offering now."
Delphi's bankruptcy filing was the largest in U.S. history for an auto-related company. The parts supplier listed assets of $17.1 billion and debts of $22.2 billion.
"In the months ahead I am going to be explaining to thousands of our dedicated workers why they are going to have to take significant reductions in wages and benefits in order for us to stay globally competitive," Miller said. "I could not find a way to look them in the eye to explain why I should be paid a $1 million salary to deliver that message."
He said in a statement that the rest of Delphi's executive compensation arrangements would be decided by the U.S. Bankruptcy Court in New York during a Nov. 29 hearing.
The company plans to emerge from Chapter 11 bankruptcy protection in 2007.
For salaried employees, "we have cut their health-care plans and their savings-plan match has been canceled," Miller said. "Their overtime is canceled and the car programs for most executives have been reduced. Now look at our hourly workers, their wages have gone up without interruption, their job security still exists which costs us $100 million per quarter. The hourly workers have not come to the party and the salary workers are already paying big time."
McTevia said Miller is smart to stick with the extended severance plans.
"He can catch all the flak he wants, but it keeps the executives from leaving," McTevia said. "This was a well-planned bankruptcy filing."
Delphi shares rose 6 cents to 54 cents Monday in over-the-counter trading. They have declined 52 percent since the day before the Oct. 8 bankruptcy filing