General Motors Corp. restored Chairman and CEO Rick Wagoner’s salary to its pre-2005 level of $2.2 million Thursday and awarded an increased salary of $1.8 million to Fritz Henderson, who was promoted to president and chief operating officer this week.

Both executives had taken pay cuts for the past two years as part of the corporation’s North American turnaround efforts. In that time, the company has reduced fixed costs by $9 billion annually, cut its hourly workforce by 34,410 and negotiated a labor agreement in the United States that is expected to relieve the automaker of future retiree health costs and cut its personnel costs by additional billions.

However, GM continues to lose money and expects to have negative cash flow again this year. Just last month, GM reported that it lost $38.7 billion last year, though most of that was a paper loss resulting from a one-time tax accounting rule. Excluding its one-time items, the automaker lost $23 million last year. The automaker lost $12.4 billion combined in 2005 and 2006.

Given the corporation’s financial status, University of Maryland business professor Peter Morici said the salaries are justified – but talk of bonuses is not.

“The $2.2 million is reasonable,” Morici said. “The bonuses are not because the company continues to lose money. Rick Wagoner has lost more money than just about any other executive except those at the New York banks. I find this remarkable. … My feeling is any bonus is undeserved, and he knows that and he knows better.”

GM announced salaries and bonus opportunities for the two top officers and newly appointed Chief Financial Officer Ray Young in a regulatory filing on Thursday. All of the bonus grants are dependent on GM’s financial results and stock-price performance.

GM’s board of directors voted to approve the compensation changes on Monday when they elected Henderson to the position of president and COO and named Young CFO.

The board restored Wagoner’s salary to its full $2.2 million. He had taken a pay cut as part of the corporation’s turnaround plan, with his salary reduced by half in 2006 and by 25 percent last year. The board also established an annual incentive target of $3.52 million and a long-term incentive opportunity of a grant of 165,563 shares of GM common stock for Wagoner. He also will receive 500,000 stock options and 75,000 restricted stock units that vest in three to five years.

The board raised Henderson’s salary to $1.8 million. Henderson, who voluntarily surrendered 15 percent of his base pay last year, received a $1.3 million salary as CFO in 2007. He had received a $1.55 million salary in 2006. This year, Henderson will be eligible to earn $2.43 million through the annual incentive plan. His long-term incentive opportunity will be a grant of 110,376 shares of GM common stock. In addition, he will receive 250,000 stock options and 60,000 restricted stock units. The stock options will vest at the same rate as Wagoner’s.

As CFO, Young will early a base salary of $900,000. Young, who had been group vice president of finance since Nov. 1 and was president and managing director of GM’s Brazilian operations.

—

(c) 2008, Detroit Free Press.

Visit the Freep, the World Wide Web site of the Detroit Free Press, at http://www.freep.com.

Distributed by McClatchy-Tribune Information Services.

AP-NY-03-07-08 1224EST