The Obama administration has announced plans to slash the pay of top executives at companies that received federal bailouts and owe significant amounts of money to the government as a result.  The announcement hit auto executives harder than leaders of any other industry.  Two of Detroit's big three still owe a lot of money, as do the finance companies that help them sell cars.

The New York Times reports, "The chairman of the panel that oversees the $700 billion federal bailout fund said Thursday the Obama administration is insisting on slashing the salaries of executives of companies that took money from the government."

The news, according to the Detroit Free Press, means that "the top 25 executives at General Motors Co., Chrysler Group LLC, GMAC and Chrysler Financial could face pay cuts."  GM CEO Fritz Henderson is scheduled to earn $1.26 million this year.  Reports have not made clear what Henderson's new salary might be. 

GM Spokesman Tom Wilkinson told Bloomberg, "We are currently in discussions with" Treasury Department Special Master on Compensation Kenneth Feinberg's office "regarding executive compensation.  We will have further information once those discussions have concluded."  Some analysts say the industry has already made concessions on executive pay.  "Auto executives' pay declined last year as Chrysler and GM ruled out bonuses as a condition of receiving federal aid. Chrysler Deputy Chief Executive Officer James Press cited the compensation cut as a reason he couldn't pay his personal debts in a creditor's recent lawsuit."

The companies won't make up the difference with hidden perks, if the Treasury Department can stop it.  The Detroit News reports that the new regulations "will require companies to get permission to grant individual executives more than $25,000 a year in perks."  They can't make up the different in stock options, either, since both companies have only recently emerged from bankruptcy, are still owned in part by the federal government and don't yet have stock to sell.

The pay cuts could, in fact, create a post-bankruptcy problem for at least one automaker.  The Free Press reports, "The sale agreement that granted Fiat 20% ownership of Chrysler exempted Fiat executives who took on responsibilities at Chrysler from any government-set compensation limits."  Executives from the old Chrysler who stayed with the new company, however, "could see their pay cut, just as [new CEP Sergio] Marchionne is trying to build teamwork between Americans and Europeans."

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