GM lifts CEO salary to $2.2 mln, ending pay cut

DETROIT, March 6 (Reuters) - General Motors Corp GM.N said on Thursday Chief Executive Rick Wagoner's 2008 salary has been raised 33 percent to $2.2 million, reversing two years of self-imposed pay cuts taken to support the automaker's turnaround effort.

GM also said Fritz Henderson, the company’s No. 2 executive, would be paid $1.8 million this year, up from about $1.3 million in 2007 when he had been chief financial officer.

Henderson, 49, who was promoted this week to become GM president and chief operating officer, also stands to receive a bonus of $2.43 million if GM hits its performance targets.

Wagoner is eligible for a bonus of $3.52 million if GM hits its turnaround targets for 2008, the automaker said in a filing with securities regulators.

The higher salaries approved by GM’s board come after the still-struggling automaker reported a record loss of $39 billion for 2007, its third consecutive net loss.

Analysts credit GM with cutting $9 billion in fixed costs, improving the quality and design of its vehicles and clinching a cost-saving contract with the United Auto Workers union that is expected to deliver up to $500 million in annual savings.

But investors remain concerned about GM's lingering exposure to its former finance subsidiary GMAC and its former parts subsidiary Delphi Corp DPHIQ.PK.

In addition, GM, like other major automakers, is seen vulnerable to the downturn in the U.S. economy that has weighed heavily on auto sales. GM’s U.S. sales are down 6.5 percent in the first two months of the year.

GM shares closed on Thursday down 2.7 percent for the day at $22.35 on the New York Stock Exchange. The stock has dropped 10 percent since the start of the year and about 64 percent since Wagoner became CEO in June 2000.

Wagoner’s pay rise restored his salary to its 2003 level. In a show of support for GM’s restructuring effort, Wagoner had opted to cut that base salary by 50 percent in 2006. His base salary was cut by a smaller 25-percent margin in 2007.

Over the same two years, Henderson had agreed to cut his former base salary of $1.5 million by 30 percent in 2006 and then by 15 percent in 2007.

UAW President Ron Gettelfinger, whose union represents some 74,000 GM workers, has raised executive pay as a concern at a time when the next round of new hires at the automakers will be brought in at half the prevailing wage, or about $14 per hour.

A UAW spokesman could not be immediately reached.

GM spokesman Renee Rashid-Merem said the automaker’s board had ensured that the bulk of executive compensation was risk-based, meaning it would be paid out only if GM performs financially and its shares gain ground.

As part of his incentive-based compensation, Wagoner, 55, also stands to receive grants of GM common stock worth about $3.7 million as of Thursday’s close. Those shares will pay out over three years. He will also get restricted stock grants now worth $1.67 million that would pay out from 2011 to 2013.

Finally, Wagoner was granted options on 1 million GM shares. Half of those options carry a strike price of just over $23 but will only vest if the stock rallies to break and hold above $40 at some point over the next five years.

Wagoner’s options on the remaining 500,000 shares, also with an exercise price of just over $23 per share, will vest over the next three years without that proviso, according to GM’s filing.

GM is expected to release full executive compensation details for 2007 when it releases its annual proxy in April. (Editing by Tim Dobbyn)