These actions include the following:

• Revised health-care benefit plan for salaried retirees in the U.S. that is expected to reduce the company's liability by about $4.8 billion and its annual health-care expense by almost $900 million before tax;
• Planned restructuring of the U.S. salaried pension benefit plan;
• 50-percent reduction in the cash dividend paid to stockholders;
• Significant reduction in salary for GM's chairman and senior leadership team;
• 50-percent reduction in compensation for outside board members.

"These are difficult decisions that involve sacrifices by our employees, stockholders, retirees, and the senior leadership team," GM Chairman and Chief Executive Officer Rick Wagoner said. "However, we are confronting a dramatic change in our industry and in the global competitive environment, and that requires us to look for additional ways to reduce financial risk and improve our competitiveness for the long term."

Wagoner said the actions announced today further support the ongoing implementation of GM's North American turnaround plan.

"We are now aggressively implementing a solid plan to turn around the North American business and restore overall profitability as quickly as possible," Wagoner said. "It includes plans to grow our revenue base with great cars and trucks and the right marketing strategies - and I have great confidence that we are moving quickly in the right direction here. We also have a clear plan to address our costs, especially in areas where we are not competitive - our structural costs, and health-care and legacy costs."

GM previously announced plans to reduce its North American structural costs by $6 billion on a running-rate basis by the end of 2006, and further plans to reduce its annual net material costs by $1 billion. GM signed a historic agreement with the UAW in October and announced a capacity reduction plan in November that included ceasing operations at nine assembly, stamping and powertrain facilities. Additionally, an aggressive target was recently announced to reduce global structural costs to 25 percent of automotive revenue by 2010 from the 2005 level of about 34 percent on a global basis.

"Our plan is focused on setting us up to be competitive for years to come, and to achieve strong business results - in revenue, income, and cash flow," Wagoner said. "We need to improve our liquidity and our balance sheet, and to reduce risks to our business and financial viability going forward. And while the steps we've announced previously are big, we said at the time we would be doing more. The next steps are today's announced actions."

General Motors today advised its U.S. salaried employees, who are eligible for retirement health-care coverage, of changes to their retiree health-care benefits.

GM will cap its contributions to salaried retiree health-care at the level of its 2006 expenditures. The cap will take effect beginning Jan. 1, 2007. This affects those employees and retirees who are eligible for the salaried post-retirement health-care benefit, their surviving spouses and their eligible dependents. Salaried employees who were hired after Jan. 1, 1993, are not eligible for retiree health-care benefits, so they are not affected by these changes.

When average costs exceed established limits following 2006, additional plan changes that affect cost-sharing features of program coverage will occur, effective with the start of the next calendar year. Program changes may include, but are not limited to, higher monthly contributions, deductibles, coinsurance, out-of-pocket maximums and prescription drug payments. Plan changes may be implemented in medical, dental, vision, and prescription drug plans.

"This is a difficult but necessary decision, and it was made only after the greatest deliberation," said Wagoner. "A number of other U.S. companies have already taken similar action in the face of these rising costs and increasing global competition. In particular, U.S. health-care costs continue to rise at high rates. When these benefits were conceived decades ago, no one could have foreseen the explosive cost inflation that we have been experiencing in recent years. These costs are simply not sustainable."

The adjustments are projected to reduce GM's retiree health-care (OPEB) liabilities by approximately $4.8 billion and cut GM's annual retiree health-care expense by approximately $900 million on a full-year pre-tax basis. The majority of the OPEB liability reduction and related expense would accrue to GM's North American automotive operations. Cash savings will be limited initially, but GM expects that cash savings from this action will grow to about $200 million within five years, and then continue to increase after that.

In addition to the health care benefit changes announced today, GM is currently evaluating ways to restructure its U.S. salaried pension benefits.

"We have decided to substantially alter the pension benefits for current U.S. salaried employees so that we can provide a competitive and fair benefit but also reduce the financial risks to GM," Wagoner said. "While we will announce specific details early next month, we intend to freeze accrued benefits in the current plan and implement a new plan for future accruals which could include a defined contribution or cash balance plan."

Wagoner said the pension plan changes would not affect current retirees or surviving spouses who are drawing benefits from the Salaried Retirement Program.

The GM Board of Directors declared a quarterly cash dividend of $0.25 per share, payable on March 10, 2006 to holders of record as of Feb. 16, 2006. The dividend had been $0.50 per share, per quarter, since the first quarter of 1997.

"While GM believes it has adequate cash to fund its turnaround initiatives, it is essential that we stay focused on enhancing our liquidity and financial flexibility," said Wagoner. The change in the dividend rate would reduce GM's cash outlay by about $565 million on an annualized basis.

GM senior leadership team will reduce its salaries as follows:

50 percent reduction for Wagoner; 30 percent reduction for vice chairmen John Devine, Bob Lutz and Fritz Henderson; 10 percent reduction for Executive Vice President and General Counsel Thomas Gottschalk.

Additionally, there were no annual or long-term cash incentive awards paid to GM's global executives for the 2005 performance year.

"While our 'pay-for-performance' executive compensation system is already structured to significantly reduce total compensation when our business performance and stock price are underperforming, we all agreed that this is the right step to take at this time," Wagoner said.

The Board of Directors voluntarily reduced board member compensation by 50 percent. Non-employee directors will forgo cash compensation and will retain some of the stock portion of their annual retainer.

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