US:Bill Ford: No cash, stock until Ford profits rise - Ford Forums

Stacy94PGT · 05-31-2005, 20:47

Bill Ford: No cash, stock until Ford profits rise

CEO's move sets example as ailing automaker looks for ways to trim its costs.

By Eric Mayne / The Detroit News

WILMINGTON, Del. -- Ford Motor Co. Chairman and CEO Bill Ford will not accept a salary, bonus or stock compensation until the company restores the profitability of its car and truck business.

Bill Ford's decision, announced Thursday at Ford's 50th annual shareholder meeting, signals his willingness to share the pain during a time of falling profits, layoffs and cost cuts at the Dearborn automaker.

It also is being seen as a savvy pre-emptive move as Ford prepares for the 2007 contract talks with the United Auto Workers -- whose bargainers often point to fat executive paychecks when pressed for concessions.

The great-grandson of company founder Henry Ford has not collected a cash salary since he became CEO in 2001. Last year, though, Bill Ford was awarded stock options, restricted stock and other compensation valued at $22 million.

In 2004, Ford's automotive business earned pretax profits of $850 million. This year, Ford expects its automotive operations to break even at best largely due to lower SUV and pickup sales in the United States.

"That's certainly not acceptable to me," Bill Ford told shareholders. "And that's certainly not acceptable to you. Automotive profitability is one of the most critical measures of our success."

He did not specify how profitable Ford needed to become before he would accept compensation again. Analysts say Bill Ford wants to set an example as the company seeks sacrifices from workers and other constituents.

"It's symbolic," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "Ford is trying to work out an agreement with the UAW. It's a very delicate time."

Cole said he would have been surprised if Bill Ford hadn't made such a move given his wealth and troubles at Ford. He owns 8.6 million common and Class B shares that pay out more than $3 million in annual dividends.

"He is very cognizant about the way things are perceived," Cole said.

With vehicle sales waning and the cost of raw materials and employee benefits rising, Ford abandoned a pledge to earn pretax profits of $7 billion by 2006, the cornerstone of Bill Ford's turnaround plan launched in January 2002.

Shortly after Bill Ford earned applause from shareholders for forgoing compensation, Wall Street sent a different message.

Moody's Investor Service downgraded the automaker's credit rating to a notch above junk status. Standard & Poor's Corp. last week downgraded Ford and General Motors Corp. debt to below investment grade.

Ford has stepped up cost-cutting efforts, including 1,000 white-collar job cuts through early retirement, and will no doubt ask the UAW for significant concessions on health care and other areas.

Tying compensation to automotive profits and setting tough goals "raises the bar significantly for Bill Ford," said Brian Tobin, executive compensation specialist with The Hay Group in Chicago.

Ford shares have fallen 42 percent since Bill Ford became CEO in October 2001, and the company has slashed its dividend. Bill Ford has more job security than a typical CEO because the Ford family controls the company through its special Class B shares. His cousin, Charlotte Ford, daughter of Henry Ford II, stood up during the meeting and voiced her support for Bill Ford.

"You have led the company through the most turbulent time that I can remember," she said. "We put all our trust in you."

Global Exchange, an environmental advocacy group, presented a proposal that calls for executive compensation to be tied to reductions in greenhouse gas emissions from Ford products. In 2004, Ford ranked last of the six major automakers for average fuel economy.

"We are asking simply that Ford take global warming seriously," said Jennifer Krill of Jumpstart Ford, another environmental organization.

"We do take global warming seriously," Bill Ford said, reminding shareholders that four additional hybrid vehicles are in Ford's product pipeline behind the 2005 Escape Hybrid.

The greenhouse gas resolution was easily defeated.

Frank Giamboi, a 42-year-old shareholder from Wilmington, said holding stock is about making money and is not always compatible with causes such as global warming.

"If it gets too hot and the stock goes sky high, you can buy another air conditioner," he said.

Ford shares on Thursday closed down 29 cents, or 3 percent, at $9.35 in New York Stock Exchange trading.

Mac Stotz, 70, was among the throng of shareholders who came away impressed with Bill Ford's leadership.

"If Ford made cigarettes, I'd start smoking," Stotz said.