Ford Motor Co. and General Motors Co. each boast two vehicles among the six finalists for the 2010 North American Car and Truck of the Year awards.

The finalists were announced yesterday at the Automotive Press Assn. in Detroit. The winners will be named on Jan. 11 at the start of the North American International Auto Show.

Car finalists are the Buick LaCrosse midsize sedan, Ford Fusion hybrid midsize sedan and Volkswagen Golf/GTI compact car. Truck finalists are the Chevrolet Equinox midsize crossover vehicle, Ford Transit Connect small commercial van and the Subaru Outback midsize crossover vehicle.

A jury of 49 automotive journalists in the U.S. and Canada selected the finalists and winners based on factors such as design, handling, innovation, safety and value.

Dieter Ehrmanntraut, CEO of Yazaki Corp.’s European unit, will become president and CEO of its North American operations on Jan. 1.

He will succeed George Perry, who will retire from the Japanese supplier at year-end. Perry became the first non-Asian CEO of the North American unit when he was appointed in 2002.

Volker Heuzeroth, chair of the European unit, will assume Ehrmanntraut’s former duties.

General Motors Co. says it will resume paying merit raises to its U.S. salaried employees next year and will disclose details of those plans in early February.

GM suspended merit pay last year as it scrambled to conserve cash in an unsuccessful attempt to avoid bankruptcy. This fall the company reversed white-collar pay cuts and restored 401(k) matches.

Ford Motor Co. told employees late last week it would reinstate merit raises, tuition assistance and 401(k) matching contributions for up to 3% of base pay.

Visteon Corp.’s committee of unsecured creditors is asking a federal bankruptcy judge to require Ford Motor Co. to turn over documents that could shed light on its relationship with its former parts subsidiary.

In court documents, the creditors say Ford appears to have used Visteon’s spinoff in 2000 to dump money-losing operations without fairly compensating the supplier. They complain that Ford’s subsequent loans to the company merely helped it limp along without resolving underlying problems. Visteon filed for Chapter 11 in May.

The Federal Reserve says the U.S. economy continues to strengthen, but central bankers opted at their meeting yesterday to leave the key overnight bank lending rate in the range of zero to 0.25%, where it has been for a year.

The Fed says it expects inflation to remain “subdued” for some time and says rates are likely to remain “extremely low” for an “extended period.”

The central bank says deterioration in the jobs market is abating, the housing market is improving and consumer spending is increasing moderately. The Fed still worries about tight credit and shrinking business investing.

Most economists don’t expect the Fed to raise interest rates any earlier than next summer. But they say the central bank’s increasing optimism could mean it plans to wean financial markets from support systems.

The Fed confirms it will wind down special liquidity measures and a program to bolster housing credit in the first quarter of 2010, as planned. Among the programs is one that allows auto lenders to raise capital by helping them sell securities backed by auto loans.

Does your company’s executive compensation program encourage senior managers to take excessive risk? The U.S. Securities and Exchange Commission will expect an answer to that question under new rules coming soon. The SEC requirement is being driven by the widespread suspicion that the global economic collapse was triggered by risky behavior among companies.

Common wisdom would suggest that pay packages encouraged top executives to take excessive risk to gain windfalls. To assess the accuracy and implications of those assumptions, Watson Wyatt Worldwide studied three years of data on more than 1,000 companies on the Standard & Poor’s 1500 list to determine which compensation elements encourage better risk management and which could promote greater risk-taking behavior. Michael Horne, office practice leader for the Compensation Practice in Southfield, Mich., comments.

What prompted the Watson Wyatt study?

The compensation committees of companies that have accepted and not yet fully repaid TARP funds are already required to certify that their compensation programs don’t promote unnecessary risk taking. It began in the financial industry, but now it is spreading, including into the automotive sector. The SEC is prepared to extend that requirement to the proxy statements of publicly traded companies in general. The challenge right now is defining “excessive risk” and developing a process to address the connection between executive pay and risk management. Regulators have not been clear on the definition, but we expect guidance soon. In the meantime, companies are beginning to look at their practices

We wanted to determine first if there truly is a connection between executive pay and undertaking riskier business strategies. If so, we wanted to find out which factors promote risk-taking and which ones don’t.

Which factors did you analyze?

We tested 13 factors that affect compensation packages to better understand their impact on the Z-Score, a measure of a company’s financial health (solvency risk) that predicts the probability of bankruptcy within 18 months.

The 13 elements include pay relative to industry standards, level of accumulated pension value and non-qualified deferred compensation, proportion of variable pay to base pay, certain incentive plan performance measures and amounts of stock options granted to executives.

We identified several “risk aggravators” that tend to encourage risk. These include unusually high pension programs, plans that generate exceptionally high levels of accumulated benefits and determining annual incentive compensation based on three or more simultaneous performance metrics.

We also found several “risk mitigators” that tend to reduce risk-taking. Examples are market-based metrics such as total shareholder return and high levels of options in long-term incentives.

What were your conclusions?

Many companies are relying on flawed assumptions to shape their executive compensation program that could lead to lower shareholder return without significantly improving risk management. First, organizations must recognize there is no single right answer. It’s a matter of degrees and checks and balances. We found that simply limiting executive compensation is not necessarily the right strategy. Tying compensation to actual company performance and making sure compensation packages are appropriately positioned within industry norms continues to make sense. Recognizing what risk means to your industry is key. The financial sector involves inherently more risk than utilities or manufacturing, for example.

The important thing for companies to recognize is that this is the new landscape of compensation. It’s only a matter of time before organizations must disclose their process on how they balance risk and reward within their executive compensation program.

How can Watson Wyatt help?

We can assess an organization’s compensation program from this new risk management perspective. We applied the findings from our broader research study to develop the Watson Wyatt Pay-Risk-Score. PRS assigns a rating based on the levels and use of program design elements we identified as risk mitigators and risk aggravators. The ratings for each element are weighed. Our objective is to help organizations identify and adjust compensation elements that aggravate risk-taking without unduly reducing the overall benefit of linking executive compensation to company performance.

To learn more about the Watson Wyatt Pay-Risk-Score, please contact Michael Horne at (248) 936-7516 or michael.horne@watsonwyatt.com.

The U.S. consumer price index, which increased 0.3% from September to October, rose 0.4% last month as energy prices jumped 4.1%, says the Dept. of Labor.

The core index, which excludes energy and food, was unchanged month over month for the first time since last December. Consumer prices were up 1.8% from a year earlier and core prices were 1.7% higher.

Separately, the Dept. of Commerce says builders broke ground on new U.S. homes last month at an annual rate of 574,000 units, up 8.9% from October. Starts for single-family homes increased 2%. Housing permits, considered a gauge of future construction, rose 6% to a 584,000-unit annual pace, the highest level in a year.

The administration caucus of the United Auto Workers nominated Bob King, head of the union’s Ford Dept., to become its president next June, as expected.

Nomination by the caucus is tantamount to election at the UAW’s constitutional convention in June. King would succeed President Ron Gettelfinger, who will retire after two four-year terms.

Gettelfinger, who praises King as “relentless and tenacious,” says the UAW has “bottomed out” after several rounds of concessions and buyouts that shrank its ranks to 431,000 members.

Dana Holding Corp. says it has extended John Devine’s contract as executive chairman through 2010.

Devine’s contract was set to expire on Dec. 31. He joined Dana in February 2008 when the company was emerging from bankruptcy.

Vice Chairman Gary Convis will retire on Dec. 31 and leave Dana’s board. He joined Dana as CEO in April 2008 and became vice chairman in January. The company says Convis will become an adviser to CEO Jim Sweetnam.

Dana Holding Corp. says it has agreed to sell its global structural products business to Mexico’s Metalsa S.A. de C.V., a subsidiary of conglomerate Grupo Proenza, for as much as $150 million.

The sale includes technical centers and 10 plants in Australia, South America and the U.S. that make chassis and body components for light and commercial vehicles. The Mexican vehicle frame and structures supplier also is buying Dana’s stake in a U.K. chassis systems joint venture with GKN plc. The operations employ 2,800 workers and generated sales of $695 million last year.

Metalsa says it will benefit by expanding to regions beyond its current base in China, India, Japan and North America. Dana says the sale will allow it to focus on its axle, driveshaft, sealing and thermal products businesses.