ArvinMeritor Workers See Slimmer Salaries
6/1/09
Top executives at auto supplier ArvinMeritor may not be thrilled with the company's decision to temporarily reduce their pay by 10.0%, but investors rewarded the company by pushing shares up nearly 50.0% on Tuesday.
Citing worsening economic conditions, ArvinMeritor said its chief executive, chief financial officer, executive vice president and several senior vice presidents would be affected by the decision, which is part of the company's larger cost-cutting initiatives. Other high-ranking employees will have their pay temporarily cut by 5.0%,
Charles McClure, the company's board chairman, president and chief executive, earned a base salary of $1.1 million in 2008.
Investors showed their support for the move, which was announced late Monday, by snapping up the company's stock, which closed Tuesday's trading session ahead by $1.28, or 49.9%, at $3.95.
The auto supplier said pay changes go into effect starting Jan. 16, and declined to estimate when original salary rates could be reinstated. The decision is tied to the performance of the U.S. auto industry, which teetered on collapse as macroeconomic conditions forced consumers to reduce discretionary spending and tight credit conditions diminished attractive financing options, making car and truck sales difficult. Although the U.S. government recently approved a bailout package for the auto industry, it is yet to be seen whether the goverment efforts will be enough to spur a turnaround.
ArvinMeritor, which supplies parts to automakers, has been along for the bumpy ride since manufacturers have drastically cut production in response to deteriorating demand. Last year, the Troy, Mich.-based company reduced its workforce by 7.0% and withdrew its 2009 guidance, which was already well below analysts' expectations.
