Daimler CEO Dieter Zetsche gets a pay haircut. Photo by Len Katz.
The good news for Daimler AG Chairman Dieter Zetsche is that he’s got another three-year contract. But he’ll have to balance it against the nearly 6% pay cut he’s been ordered to take by the automaker’s supervisory board after the company missed its profit targets and palace intrigue at Daimler’s Stuttgart headquarters begins to intensify.
If misery loves company, Zetsche isn’t alone. As TheDetroitBureau.com reported earlier this week, Volkswagen AG CEO Martin Winterkorn took a nearly $4 million haircut, though his pay still came to nearly $20 million.
And then there’s General Motors Chairman and CEO Dan Akerson. Early reports indicated he was gunning for a 20% pay hike, which would bring his all-in compensation to $11 million. But with Washington bureaucrats criticizing recent increases in pay for executives at companies that survived the recession through federal bailouts, Akerson apparently decided he’s be comfy with the $9 million he got last year.
VW's Winterkorn takes a pay cut even though the German maker's earnings climbed 41%.
Winterkorn’s cut came even as Volkswagen reported a positively massive 41% increase in earnings for 2012, to $29 billion. But the VW board is clearly worried about the less than upbeat prospects for 2013, especially in light of the lingering downturn in Europe.
(GM denies Akerson asking for 20% pay hike. Click Here for more.)
Thinks are even more troubled at Daimler, it seems. Zetsche’s compensation for 2012 totaled 8.15 million euros or $10.9 million compared with 8.65 million euros a year earlier, according to the company’s annual report, a 5.8% decline. But he may have been the lucky one, as the combined short-term annual bonuses of all eight board members was scaled back 28%.
Daimler recently scrapped an already weak earnings target for 2013 amid the continuing economic uncertainty in Europe and troubles in China. The company had to take the unusual step of cutting prices in that huge market last year, including models such as the flagship S-Class.
The board did renew Zetsche’s contract for three years – but that was notably shorter than the five years won by other CEOs in German industry, including Norbert Reithofer, head of BMW.
Zetsche, 59, is facing pressure to overhaul an aging Mercedes model line, which lost ground in deliveries last year to BMW and Volkswagen’s Audi brand.
The contract approval also was apparently filled with some intrigue, according to German weekly Der Spiegel.
The Supervisory Board, which includes several representatives of organized labor, not only took a razor to Zetsche but insisted that Andreas Renschler and Wolfgang Bernhard, Zetsche’s chief lieutenant, had to switch jobs. Renschler took over responsibility for production at the Mercedes car group, while Bernhard will assume responsibility for the truck group effective April 1. Bernhard has been in charge of the cost-cutting drive Zetsche ordered last year.
The powerful works council representing the unionized employees at Mercedes-Benz had complained that Bernhard had failed to consult with them about the proposed reductions. according to accounts emerging from Germany. Renschler was considered more amenable to negotiation and discussion, according to accounts in the German press.
Bernhard had been widely considered Zetsche’s most likely successor but his abrupt shift may hamper his chances of succeeding his friend and mentor — but with executive talent at a premium across the industry could find him fielding offers from other automakers.
Daimler also has been hampered by a disjointed sales strategy in the critical China market where it has steadily fallen behind BMW and Audi. Meanwhile, the costs for expanding its model lineup resulted in a reported a 2% drop in EBIT, or earnings before interest and taxes, last year.
Not all senior automotive executives are feeling the pinch personally. Both Ford CEO Alan Mulally and Fiat/Chrysler CEO Sergio Marchionne are taking home improvements that will bring their total compensation to more than $20 million.
And with Mulally slowly inching towards retirement, Ford this month approved a big increase in his pension payments. Though Ford declined to provide specific numbers, one wag inside the company suggested the former Boeing executive will be able to buy a “747 full of gold watches.”