WASHINGTON – The Obama administration’s pay czar is limiting 2010 compensation for top executives at GMAC Inc. because the auto finance giant continues to lose money and has no strategy for repaying its $16.3 billion taxpayer bailout, according to people familiar with the negotiations.
Only one of the top 25 earners at GMAC will earn more than $500,000 in cash, and CEO Michael Carpenter will receive only stock compensation and no cash, said the people, who spoke on condition of anonymity because they were not authorized to discuss the talks.
The agreements follow months of wrangling with Kenneth Feinberg, the Treasury Department’s special master for executive compensation. They reflect his concern that GMAC has no plan to return to profitability or repay its bailout.
Feinberg is expected next week to announce 2010 pay packages for the top 25 earners at companies that continue to rely on “extraordinary assistance” from the government, including GMAC, American International Group Inc., General Motors and Chrysler.
Last year, Feinberg allowed two GMAC executives to exceed the $500,000 cash cap, and granted Carpenter an annual pay package worth $9.5 million. After becoming CEO in November, Carpenter earned about $1.2 million, including about $120,000 cash, for six weeks’ work.
Officials in the Bush and Obama administrations said GMAC had to be rescued along with automakers General Motors and Chrysler because GMAC provides crucial financing for auto dealers.
But the company’s biggest financial problems come from subprime mortgages and other risky loans it financed in the years leading up to the financial crisis.
A watchdog report last week blasted the bailouts, saying officials might have saved taxpayers billions by putting GMAC’s non-auto businesses into bankruptcy and saving only the crucial auto finance arm.
The report also questioned Feinberg’s approval of Carpenter’s generous 2009 pay package.
Separately, AIG has decided to return a promised $45 million in retention payments in part by reducing payments to former employees, according to people familiar with the negotiations.
Feinberg had threatened broader pay cuts if AIG could not come up with the money, which employees promised they would return after the payments sparked a public outcry.
AIG employees agreed to forgo most of the money, but holdouts among former employees refused, insisting they were legally entitled to the full payments.
The company now believes it has the legal authority to withhold a portion of the payments, according to another person familiar with the matter. The person spoke on condition of anonymity because he was not authorized to discuss the company’s thinking.
Feinberg and an AIG spokesman would not comment. GMAC did not respond to requests for comment.