Wednesday November 11, 07:40 AM

Pay restrictions could hurt GM - chairman

SEGUIN, Texas (Reuters) - General Motors Co could be hurt by pay restrictions on senior executives set by the U.S. government as it looks to hire from outside as part of a push to profitability and the repayment of government loans, the automaker's chairman said on Tuesday.

Ed Whitacre, who became chairman of a reconstituted 13- member GM board when the automaker emerged from bankruptcy in July, also defended the decision earlier this month for GM to keep its European Opel and Vauxhall brands.

"It's been a confusing decision, but I don't think it was handled badly," Whitacre told reporters. "The circumstances changed from the time this started. The financial part of the business got better. Conditions have changed."

Whitacre's comments on GM were the first he has made at length since becoming chairman and emerging as the face of the automaker in a series of television ads asking American consumers to give GM vehicles another chance.

He said GM would face difficulties in hiring senior executives from outside the company under the current pay caps set by the Obama administration.

Under the caps set for GM's top 25 executives, GM Chief Executive Fritz Henderson had his cash salary cut 25 percent to $950,000 from $1.26 million.

Cash salaries for the top executives were cut by 31 percent and only one other unnamed executive other than Henderson will be paid more than $500,000 for 2009.

Whitacre said that $500,000 limit made hiring from outside difficult and urged a reconsideration of the limits set by the Treasury Departments's special master Kenneth Feinberg.

"To find top-level people where you need them, that's a more difficult thing to do at that salary level," Whitacre said. "I don't think (the caps) will be lifted, but hopefully they'll be modified."

Whitacre, who was speaking to reporters before an address at Texas Lutheran University, said GM was also hurt by a "perception gap," saying consumers have not yet given it credit for the improvements it has made in quality and styling.

(Reporting by Jim Forsyth; writing by Kevin Krolicki; editing by Andre Grenon)