ArvinMeritor Cuts Salaries by 5 to 10 Percent

ArvinMeritor, a Michigan-based part supplier, has just announced that it plans to cut salaries by 10 and 5 percent for approximately 100 senior executives and 1,700 white-collar workers, respectively. As usual, the company claims the financial recession is the main reason for this cut, explaining that the part supplier is experiencing problems due to the sinking automotive market in the United States.

This is not the first cost-cutting measure announced by ArvinMeritor as the company last month announced it decided to slash approximately 1,500 jobs due to a “continuous distress” in the automotive markets, Autonews wrote today.

Getting back to payments, ArvinMeritor says it will reduce salaries by 10 percent for senior executives starting January 16, including for CEO Chip McClure and Chief Financial Officer Jeffrey Craig. According to the aforementioned source, McClure had a base salary of about $1,120,833 for fiscal year 2008, a 4.5 percent increase from the previous year.

ArvinMeritor isn't the first part supplier that experiences problems due to the economic downturn, with several auto parts manufacturers forced to alter production and start a cost-cutting program to reduce loses.

Continental, for instance, said in December 2008 that it plans to rethink its initial 2009 strategy in order to align its offering to the market demand. And problems are not even close from being over, analysts think, with auto part suppliers almost forced to reduce costs and payments.

"To have it all stop tomorrow isn't what the industry wants or needs. They need some lead time to work this through the system,” Michael Robinette, vice president of forecast services with consulting firm CSM Worldwide, explained the situation of the automotive industry.