Ford CEO to forgo pay until company turns around

Ford Motor Company’s top executive said he will forgo all compensation until his family’s company returns to profitability and will ask for future pay to be tied to the company’s performance.

"I believe that automotive profitability is one of the most critical measures of our success as we go forward and that’s why I’ve asked the compensation committee to tie my future compensation even more directly to the performance of the company’s core automotive business," chairman and chief executive Bill Ford said at the automaker’s annual shareholder’s meeting in Delaware.

Bill Ford traditionally turns down a 1.5 million dollar cash compensation package entitled to him as company leader.

He will now also forgo other forms of compensation, which last year totaled 22 million dollars, mostly in the form of stock.

Bill Ford said he will wait until he and the compensation committee "are satisfied that the company has achieved and is sustaining profitability" before accepting any pay. A spokesman told AFP that Ford will record a zero payout to its CEO in 2005 and may also do so in 2006.

The automaker has been struggling with weak sales and saw its debt downgraded to junk status on May 5 by credit risk appraiser Standard and Poor’s.

Echoing many in the investment community, S and P queried whether the managerial strategies of the Ford and General Motors, which was also downgraded to junk status, might not prove "ineffective" in addressing "mounting competitive challenges".

On Thursday, Moody’s Investors Service downgraded Ford’s investment status and warned that a move to junk status was possible.

The primary challenge facing Ford, according to Moody’s, is its ability to sustain market share even as consumers move away from its lineup of trucks and SUVs, which have long been the cornerstone of profitability for Ford.

"Over the next 12 to 18 months, it remains possible that these conditions could cause Ford’s credit quality to erode and could contribute to a further downgrade," Moody’s said.

Last year, Ford made just 850 million dollars of its 3.5 billion dollar profit from the automotive unit, deriving the rest from its Ford Motor Credit Co. lending arm. That unit is expected to take a hit from the S and P downgrade as borrowing costs will increase and the amount of loans it can underwrite may decline.

In 2005, Ford expects to break even with automotive and post a somewhat disappointing full-year profit performance in the range of 1.25 dollars to 1.50 dollars per share. Ford has said it expects to miss its mid-decade target of 3.5 billion dollars in pre-tax automotive profits in 2006.