What's an Auto Industry CEO Worth?

Consider this timing: American Axle & Manufacturing (NYSE: AXL) ended a strike by persuading workers to accept a contract that includes significant pay cuts. A month later, management announced its decision to give bonuses to executives, including a multimillion-dollar award for the CEO.

After the markets close on Fridays is always a time when you'll find companies trying to slip by some news that they'd rather people didn't notice, and American Axle didn't disappoint. The parts supplier whose strike caused its largest customer, General Motors (NYSE: GM), to idle around 30 plants because of parts shortages, filed a notice with the SEC on Friday that it had granted lavish bonuses to its top executives, including $8.5 million for CEO Richard Dauch.

Strip away the corporate legalese, and management's essentially saying that it postponed the bonuses because it didn't want to be forthright in giving away millions of dollars to executives at the same time the guys on the shop floor were being forced to take pay cuts. And when you're giving away as much as American Axle did here, you sure as heck want as few people as possible knowing about it.

In contrast, the contract the workers got stuck with includes cuts that slashed most of their wages from $28 an hour to somewhere between $14.35 to $18.50. One of the primary reasons the deal got done was because GM kicked in $18 million on top of the $200 million American Axle was contributing for buyouts and such.

I wonder if GM CEO Rick Wagoner knew that at a time when his company is losing its place amid the top of the auto world to Toyota (NYSE: TM), and his company sits within striking range of bankruptcy along with Ford (NYSE: F), his cash infusion would fund sumptuous bonuses for American Axle's management.

Don't get me wrong, I'm not a particularly strong fan of unions; I believe they have been a large part of what has led to manufacturing's decline in this country. Moreover, I'm also not in favor of imposing caps on management salaries, nor having politicians determine what is appropriate compensation for executives. When Countrywide Financial 's (NYSE: CFC) Angelo Mozilo was hauled before Congress recently to answer about his pay, I said he had nothing to apologize for to the politicians, even if shareholders were owed a lengthy explanation. In fact, it's ultimately for shareholders to decide what management gets paid, if only they would take their ownership stakes more seriously and vote their proxy statements accordingly.

Yet when management goes into negotiations with its unions hat-in-hand, and imposes drastic pay cuts on line workers -- most of whom don't have the luxury of company-paid-for cars, meals, and personal umbrella insurance policies -- it galls at the sense of fairness. The company said the bonuses, to Dauch in particular, were because of leadership during the often acrimonious strike with the union. Well, that's what a CEO is supposed to be doing.

This is no way to run a railroad or a car-parts supplier, and shareholders ought to remember this when it's time to reelect directors at the next annual meeting.

Copyright © 2008 Universal Press Syndicate.