February 24, 2009 - Ford Motor Company, Detroit MI

Ford Executives Cut Own Pay 30% for 2 Years

Executives at the Ford Motor Company have decided to cut their pay by 30 percent for the next two years, and to suspend bonuses for salaried workers this year, the automaker told employees in a memo on Tuesday.

In addition, Ford will offer another round of buyouts and early retirements to all of its hourly workers, a person with knowledge of the plan said. The person spoke on condition of anonymity because the plan had not been made public.

The memo, which also said that all members of Ford’s board had agreed to forgo cash compensation this year, was issued a day after Ford reached a deal with the United Automobile Workers that lets the company pay less cash into a retiree health care fund.

U.A.W. leaders from Ford plants around the country voted Tuesday in favor of the concessions and hope that workers will ratify the changes by March 9, the union said in a statement.

The memo was from Ford’s executive chairman, William Clay Ford Jr., and its chief executive, Alan R. Mulally. In it, they told employees: “We have pledged to continue to work with all of our stakeholders to restructure and improve our competitiveness. In doing so, we know that success will require working together by all parties.”

A copy of the memo was obtained by The New York Times. It was first reported Tuesday by The Wall Street Journal.

The executives also said that they “remain firm in our resolve to operate without needing to access a bridge loan from the U.S. government.” Ford, which lost $14.6 billion in 2008, the largest annual loss in its history, is the only Detroit automaker not taking federal aid. The company says it is in better shape financially than General Motors and Chrysler, which have borrowed $17.4 billion from the government since December and are asking for $39 billion to help them avoid bankruptcy.

“We think it’s important to show that everybody at Ford is doing what’s necessary to get through this downturn and get the company healthy again,” Mark Truby, a Ford spokesman, said.

This will be the second consecutive year that salaried workers at Ford will not earn performance bonuses. The company already had said that salaried workers would not get merit raises this year.

Mr. Mulally received a $2 million salary and total compensation of $21.7 million in 2007, according to regulatory filings. The company has not yet released executive compensation figures for 2008.

Mr. Ford currently does not collect a salary. (He was paid $1 a year from 2005 through 2007.) The 30 percent reduction affects money being set aside in 2009 and 2010 that he has said he will collect only when the company becomes profitable again.

At hearings in Washington several months ago, Mr. Mulally pledged to take a $1 annual salary if Ford took federal loans.

Separately on Tuesday, a bankruptcy judge in New York agreed to let G.M.’s former parts division, the Delphi Corporation, eliminate health care benefits for 15,000 salaried retirees. Delphi, based in Troy., Mich., and spun off from G.M. in 1999, said its lenders had demanded the cuts, which will save the company $70 million a year and reduce its debt by $1.1 billion.

Delphi has been operating under bankruptcy protection since 2005. It has struggled to reorganize in the industry’s downturn. Last year a group of investors who had agreed to finance its turnaround plan backed out. More than 1,600 Delphi retirees wrote to the judge this month to ask that he not let the company terminate their benefits.

Story Above - New York Times

Original Memo Below

Memo to Ford workers from chairman, CEO

Sent to all Ford Workers February 24th

As you know, all of us on the Ford team remain absolutely committed to continuing to make progress on our transformation plan so that we can operate through this extraordinary global economic downturn and secure the product-led future that will deliver profitable growth for us all.

Importantly, we remain firm in our resolve to operate without needing to access a bridge loan from the U.S. government – a move that is being applauded by our employees, our dealers, our suppliers and our customers – while at the same time participating in the current industry restructuring to ensure Ford’s competitiveness with the best in the business.

While we have much work in front of us, we have made great progress in the past week, and we wanted to share the information with the entire Ford team.

We announced this week that we have reached tentative agreements with the United Auto Workers in the U.S. to modify certain operating provisions of the 2007 National Labor Agreement, as well as modifications to the Voluntary Employee Beneficiary Association (VEBA) retiree health care trust. These agreements are pending ratification of our UAW-Ford membership, and, out of respect for that process, we will not provide other details of the proposed changes at this time. What we can say is that these agreements are critical to allowing Ford to become competitive with foreign automakers’ U.S. manufacturing operations and to continue to fully invest in our ONE Ford product plan.

In addition to these new tentative agreements with the UAW, we have pledged to continue to work with all of our stakeholders to restructure and improve our competitiveness. In doing so, we know that success will require working together by all parties.

To this end, we are announcing today additional changes to compensation for our senior leadership and salaried employees. These actions include:

• Both of us have voluntarily agreed to accept a 30 percent reduction in salary for 2009 and 2010. In addition, as we previously announced, the Executive Chairman’s total compensation will continue to be set aside and not paid until the company’s global Automotive operations return to profitability.

• Our Board of Directors has voluntarily agreed to forego all cash compensation this year.

• Performance bonuses for global salaried employees and senior executives for 2009 – which would be paid in March 2010 – will be eliminated. This is in addition to the previously announced elimination of performance bonuses for 2008, merit pay increases for North American salaried employees in 2009 and other compensation actions around the world.

We know these are challenging times and we all are affected by the tough actions we are taking. However, these are necessary actions to help us emerge as an even stronger, profitably growing Ford Motor Company for the benefit of us all.

Thank you for all you are doing.

Bill and Alan