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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
DETROIT DIESEL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date filed:
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LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DATE: TUESDAY, APRIL 29, 1997
TIME: 9:00 AM EASTERN DAYLIGHT TIME
LOCATION: FLORIDA DETROIT DIESEL-MTU
4141 S.W. 30TH AVENUE
FT. LAUDERDALE, FLORIDA USA
To Detroit Diesel Stockholders,
We invite you to attend our 1997 Annual Meeting of Stockholders next month
in Florida. At this meeting, you and the other stockholders will be able to vote
on the following proposals, together with any other business that may properly
come before the meeting:
1.Elect four directors to three-year terms on the Board of Directors.
The board has nominated for re-election Gary G. Jacobs, Timothy D.
Leuliette, Joseph F. Welch and R. Jamison Williams, Jr., all current
directors.
2. Ratify the board's appointment of Deloitte & Touche LLP as the
company's independent auditors for fiscal year 1997. Deloitte &
Touche served in this same capacity in fiscal 1996, with the
stockholders' approval.
You may vote on these proposals in person or by proxy. (See the attached
proxy statement for more details on voting by proxy.) If you cannot attend the
meeting, we urge you to complete and return the enclosed proxy promptly in the
enclosed self-addressed, stamped envelope, so that your shares will be
represented and voted at the meeting in accordance with your instructions. Of
course, if you attend the meeting, you may withdraw your proxy and vote your
shares. Only stockholders of record at the close of business on March 14, 1997,
will be entitled to vote at the meeting or any adjournment thereof.
By order of the Board of Directors
MARY LOU PERNICANO
Secretary
Detroit, Michigan
March 25, 1997
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CONTENTS
INTRODUCTION................................................ 1
This Proxy Solicitation................................... 1
The Annual Meeting........................................ 1
Stockholders.............................................. 1
VOTING...................................................... 2
How to Vote Your Shares................................... 2
How to Vote under 401(k) Plans............................ 2
Where to Find Voting Results.............................. 2
PROPOSALS................................................... 3
Election of Directors..................................... 3
Approval of Independent Auditors.......................... 3
Other Matters............................................. 3
BOARD OF DIRECTORS.......................................... 4
Directors Continuing in Office............................ 4
Meetings and Committees................................... 5
Director Compensation..................................... 5
Compensation Committee Interlocks and Insider
Participation.......................................... 5
Section 16(a) Beneficial Ownership Reporting Compliance... 5
EXECUTIVE COMPENSATION...................................... 6
Salary and Bonus.......................................... 6
Stock Options............................................. 6
Other Compensation and Benefits........................... 6
Compensation Committee Report on Executive Compensation... 7
CERTAIN STOCKHOLDERS........................................ 9
Diesel Project Development and Its Affiliates............. 9
Penske Corporation and Its Affiliates..................... 9
Appendix A -- Performance Graph............................. 10
Appendix B -- Stockholdings................................. 11
Appendix C -- Executive Compensation........................ 13
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DETROIT DIESEL CORPORATION
13400 OUTER DRIVE, WEST
DETROIT, MICHIGAN 48239-4001
PROXY STATEMENT
------------------------
March 25, 1997
INTRODUCTION
The Board of Directors is soliciting your proxy to encourage your
participation in the voting at the Annual Meeting and to obtain your support on
each of the proposals. You are invited to attend the Annual Meeting and vote
your shares directly. However, even if you do not attend, you may vote by proxy,
which allows you to direct another person to vote your shares at the meeting on
your behalf.
THIS PROXY SOLICITATION
There are two parts to this solicitation: the proxy card and this proxy
statement. The proxy card is the means by which you actually authorize another
person to vote your shares in accordance with your instructions.
This proxy statement provides you with a variety of information on the
proposals and other matters that you may find useful in determining how to vote.
It is divided into five sections following this Introduction:
- - "Voting", page 2.
- - "Proposals", page 3.
- - "Board of Directors", page 4.
- - "Executive Compensation", page 6.
- - "Certain Stockholders", page 9.
We have supplemented these sections with tables and other information, all
of which appears in the appendixes, beginning on page 10. For your reference, a
table showing the performance of the company's stock over the past three years
is included in Appendix A.
The company will pay for soliciting these proxies. The company's directors,
officers and employees may solicit proxies in person or by telephone or by mail,
telecopy, telegraph or letter. The company has also retained ChaseMellon
Shareholder Services, L.L.C. to assist in distributing proxy solicitation
materials and soliciting proxies at a cost of approximately $3,500, plus
reasonable out-of-pocket expenses. The company will reimburse brokers and other
nominees for their reasonable out-of-pocket expenses for forwarding proxy
materials to beneficial owners of stock held of record by them.
THE ANNUAL MEETING
As shown in the Notice of Annual Meeting, the Annual Meeting will be held
on Tuesday, April 29, 1997, in Ft. Lauderdale, Florida. The company's bylaws
require that a majority of the company's common stock be represented at the
Annual Meeting, whether in person or by proxy, in order to transact business.
Abstentions and broker non-votes will be counted in determining whether or
not there is a quorum at the Annual Meeting. Abstentions will also be counted
when tabulating the votes cast on the proposals (other than the election of
directors), but broker non-votes will not be.
Representatives of Deloitte & Touche LLP, the company's independent
auditors, are expected to be present at the Annual Meeting. They will have the
opportunity to make a statement at the meeting if they desire to do so and are
expected to be available to respond to appropriate questions.
There were no stockholder proposals submitted for the Annual Meeting. The
company must receive stockholder proposals for the 1998 Annual Stockholders
Meeting at its principal executive offices by November 24, 1997.
STOCKHOLDERS
On March 14, 1997, the Company had issued and outstanding 24,698,816 shares
of common stock and there were approximately 2,750 stockholders. Based on the
latest information provided to the company, Penske Corporation beneficially owns
approximately 46% of the company's outstanding common stock and Diesel Project
Development, Inc. beneficially owns approximately 20%.
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VOTING
You are entitled to one vote at the Annual Meeting for each share of the
company's common stock that you owned of record at the close of business on
March 14, 1997. The number of shares you own (and may vote) is listed at the top
of the back of the proxy card.
HOW TO VOTE YOUR SHARES
You may vote your shares at the Annual Meeting in person or by proxy. To
vote in person, you must attend the Annual Meeting, and obtain and submit a
ballot, which will be provided at the meeting. To vote by proxy, you must
complete and return the enclosed proxy card.
The proxy card is fairly simple to complete, with specific instructions
right on the card. By completing and submitting it, you will direct the
designated persons (known as "proxies") to vote your shares at the Annual
Meeting in accordance with your instructions. The board has appointed Roger S.
Penske and J. Randall Lawrence to serve as the proxies for the Annual Meeting.
Your proxy will be valid only if you sign, date and return it before the
Annual Meeting. If you complete all of the proxy card except the voting
instructions, then the designated proxies will vote your shares for the election
of the nominated directors and the ratification of the company's independent
auditors. If any nominee for election to the board is unable to serve, which is
not anticipated, or if any other matters properly come before the meeting, then
the designated proxies will vote your shares in accordance with their best
judgment.
You may revoke your proxy at any time before it is exercised by any of the
following means:
- - Notifying the company's Secretary in writing.
- - Submitting a later dated proxy.
- - Attending the Annual Meeting and voting. Your attendance at the Annual Meeting
will not by itself revoke a proxy; you must vote your shares.
HOW TO VOTE UNDER 401(K) PLANS
If you are a company employee participating in any of the company's 401(k)
plans, then you may be receiving this material because of shares held for you in
the plan. In that case, you may use the enclosed proxy card to instruct the plan
trustees how to vote those shares. The trustees will vote the shares in
accordance with your instructions and the terms of the plan.
The plan trustees may vote the shares held for you even if you do not
direct them how to vote. The trustees will vote any shares for which they do not
receive instructions in the same proportion as they vote the shares for which
they receive instructions.
WHERE TO FIND VOTING RESULTS
The company will publish the voting results in its Form 10Q for the first
quarter of 1997, which it will file with the Securities and Exchange Commission
in May 1997. You will also find the results in the investor information section
of the company's home page on the World Wide Web (www.detroitdiesel.com).
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PROPOSALS
The board has nominated four current directors -- Gary G. Jacobs, Timothy
D. Leuliette, Joseph F. Welch and R. Jamison Williams, Jr. -- for new,
three-year terms and recommends that you vote for their re-election. The board
has approved Deloitte & Touche LLP as the company's independent auditors for
fiscal year 1997 and recommends that you vote for their ratification.
ELECTION OF DIRECTORS
The first proposal on the agenda for the Annual Meeting will be the
election of four directors to serve as Class I directors for three-year terms
beginning at this Annual Meeting and expiring at the 2000 Annual Stockholders
Meeting. (For a description of the three classes of directors, see the "Board of
Directors" section beginning on page 4.) The four nominees receiving the
greatest number of votes cast will be elected.
The Board of Directors has nominated Gary G. Jacobs, Timothy D. Leuliette,
Joseph F. Welch and R. Jamison Williams, Jr. for re-election as Class I
directors. The following is a brief biography of each nominee. You will find
information on their holdings of the company's stock in Appendix B.
GARY G. JACOBS is 55 years old. He has been a director of the company since
January 1994. He is the President and Chief Executive Officer of Laredo National
Bancshares, Inc. (a bank holding company) and Chairman of The Laredo National
Bank.
TIMOTHY D. LEULIETTE is 47 years old. He has been a director and Vice
Chairman of the company since 1996. Before that, Mr. Leuliette had been
President and Chief Executive Officer of ITT Automotive, Inc., and Senior Vice
President of ITT Industries, Inc., since 1991, and was President and Chief
Executive Officer of Siemens Automotive, L.P. from 1988 to 1991. Mr. Leuliette
is also a director and the President and Chief Operating Officer of Penske
Corporation. Mr. Leuliette is a director of Libbey-Owens-Ford and the Detroit
Branch of The Federal Reserve Bank of Chicago. His other affiliations have been
with the Leukemia Society of America, Children's Center, Vision 2000, Arthritis
Foundation and Junior Achievement.
JOSEPH F. WELCH is 62 years old. He has been a director of the company
since January 1994. He is the Chairman and Chief Executive Officer of The
Bachman Company, a producer of snack foods.
R. JAMISON WILLIAMS, JR. is 55 years old. He has been a director of the
company since 1988. He is a shareholder in the law firm of Williams, Williams,
Ruby & Plunkett, P.C., in Birmingham, Michigan. He is also a director of Price
Manufacturing, Inc., a Canadian bedding manufacturer.
The Board of Directors recommends that you vote FOR the election of Messrs.
Jacobs, Leuliette, Welch and Williams.
APPROVAL OF INDEPENDENT AUDITORS
The next proposal on the agenda for the Annual Meeting will be ratifying
the board's appointment of Deloitte & Touche LLP as the company's independent
auditors for fiscal year 1997.
Deloitte & Touche served in this capacity for fiscal 1996, and has reported
on the company's 1996 consolidated financial statements. The Audit Committee
recommended to the board that Deloitte & Touche be reappointed for fiscal year
1997.
The Board of Directors recommends that you vote FOR the ratification of
Deloitte & Touche LLP as the company's independent auditors for fiscal year
1997.
OTHER MATTERS
Neither the company nor its directors intend to bring before the Annual
Meeting any matters other than the election of the four directors and the
ratification of the company's independent auditors. Also, they have no present
knowledge that any other matters will be presented by others for action at the
meeting.
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BOARD OF DIRECTORS
The Board of Directors consists of ten directors divided into three classes
(Class I, Class II and Class III) serving staggered three-year terms. The Class
I directors are up for election at the Annual Meeting, and the nominees for
election are all currently Class I directors.
DIRECTORS CONTINUING IN OFFICE
The Class II and III directors will continue in office following this
Annual Meeting, and their terms will expire in 1998 (Class II) or 1999 (Class
III). The following are brief biographies of each of these directors. You will
find information on their holdings of the company's stock in Appendix B.
DR. ECKHARD CORDES is 46 years old. He has been a director of the company
since March 1997, replacing Helmut Werner, and his current term as a Class III
director expires in 1999. Dr. Cordes is a Deputy Member of the Daimler-Benz AG
Board of Management, Corporate Development and Rail Systems, Microelectronics.
Before that, he was a Senior Vice President, Corporate Development of
Daimler-Benz from 1995 to 1996; Senior Vice President, Corporate Planning and
Controlling of Daimler-Benz from 1994 to 1995; and Senior Vice President,
Controlling, Corporate Planning and M&A of AEG AG, a Daimler-Benz affiliate,
from 1991 to 1994.
JOHN E. DODDRIDGE is 56 years old. He has been a director of the company
since January 1994, and his current term as a Class II director expires in 1998.
Mr. Doddridge is the Chairman and Chief Executive Officer of Intermet Corp., a
publicly-traded metal casting company. He was, from November 1992 to October
1994, the Vice Chairman of the Board of Directors and Chief Executive Officer of
Magna International, Inc., a publicly-traded manufacturer of technologically-
advanced automotive components, assemblies and systems. Mr. Doddridge was
President, North American Operations of Dana Corporation from April 1989 to
November 1992. Mr. Doddridge is also a member of the Board of Directors of
Standard Products Co.
WILLIAM E. HOGLUND is 62 years old. He has been a director of the Company
since 1990, and his current term as a Class III director expires in 1999. Mr.
Hoglund retired as Executive Vice President of General Motors Corporate Affairs
and Staff Support Group in December 1994, a position he had held since the group
was established in November 1992. Before that, Mr. Hoglund was Executive Vice
President and Chief Financial Officer of General Motors from April 1992 to
November 1992. He had served as Executive Vice President of General Motors since
August 1988. Mr. Hoglund is also a member of the Boards of Directors of Standard
Federal Bank, N.A. and Mead Corporation, as well as the Sloan Foundation.
LUDVIK F. KOCI is 60 years old. He has been a director of the company since
its organization in 1987, and his current term as a Class II director expires in
1998. Mr. Koci has been President and Chief Operating Officer since December
1989. Before that, Mr. Koci had been Executive Vice President of the Company
since the company's organization in 1987. Prior to the company's commencement of
operations in January 1988, Mr. Koci had been employed by General Motors since
1954. Mr. Koci is also a Director of Wabash National Corporation.
DR. KURT J. LAUK is 50 years old. He has been a director of the company
since 1996, and his current term as a Class II director expires in 1998. Dr.
Lauk is the Head of the Commercial Vehicle Division, Daimler-Benz and a member
of its Board of Management. Before that, he was a member of the Board of
Management of VEBA, AG, Dusseldorf, responsible for finance and controlling,
from 1992 to 1996, and Deputy President of AUDI AG, Ingolstadt, responsible for
finance, business management and marketing, from 1989 to 1992.
ROGER S. PENSKE is 60 years old. He has been Chairman and a director of the
company since its organization in 1987, and his current term as a Class III
director expires in 1999. Mr. Penske is also Chairman of the Board and Chief
Executive Officer of Penske Corporation. Penske Corporation is a privately-owned
diversified transportation services company which (among other things) holds,
through its subsidiaries, interests in a number of businesses, including Penske
Truck Leasing Co., L.P., Penske Motorsports, Inc., and Diesel Technology
Company. Mr. Penske is also a member of the
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Boards of Directors of Philip Morris Companies Inc., General Electric Company
and Penske Motorsports, Inc.
MEETINGS AND COMMITTEES
During 1996, the Board of Directors held four meetings and took action by
written consent twice in lieu of additional meetings.
The Board of Directors has a standing Audit Committee, consisting of Gary
G. Jacobs (Chairman), Joseph F. Welch and R. Jamison Williams, Jr. During 1996,
the Audit Committee held two meetings. The duties of the Audit Committee are
generally:
- - to recommend to the board independent auditors to audit annually the company's
books and records,
- - to review the activities and the reports of the company's independent
auditors, and
- - to report the results of its review to the board.
The Audit Committee also periodically reviews the activities of the company's
internal audit staff and the adequacy of the company's internal controls.
The board also has a standing Compensation Committee, consisting of John E.
Doddridge (Chairman), William E. Hoglund and Dr. Eckhard Cordes, who replaced
Helmut Werner on the committee in early 1997. During 1996, the Compensation
Committee held one meeting. The duties of the Compensation Committee are
generally:
- - to recommend to the board the remuneration arrangements for senior management
and directors,
- - to recommend to the board compensation plans in which officers or directors
are eligible to participate, and
- - to grant awards under the company's stock incentive plan.
The company has no nominating committee.
DIRECTOR COMPENSATION
Directors who are not employees of the company or Daimler-Benz receive
directors' fees of $25,000 per year, plus $1,000 per day of attendance at
committee or other meetings relating to company business (other than for a day
on which there is a board meeting). These directors may elect to defer their
compensation under the company's Deferred Compensation Plan for Directors, a
non-qualified benefits plan for non-employee directors. In addition, the company
reimburses its directors for expenses, including travel, they incur in
connection with attending meetings.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
During 1996, the Compensation Committee consisted of John E. Doddridge,
William E. Hoglund and Helmut Werner. Mr. Werner, who resigned from the board in
1997, was during 1996 the Chairman and Chief Executive Officer of Mercedes-Benz
and a member of the Board of Management of its parent, Daimler-Benz. You will
find more information regarding certain relationships between the company and
Diesel Project Development, and its affiliates, in the "Certain Stockholders"
section beginning on page 9.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Dr. Kurt J. Lauk filed his initial statement of beneficial ownership on
Form 3 with the Securities and Exchange Commission late.
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EXECUTIVE COMPENSATION
This section provides summary information regarding the compensation of
Roger S. Penske, Chairman, and the four most highly compensated officers other
than Mr. Penske: Ludvik F. Koci, President; Robert R. Allran, Senior Vice
President-Operations; A. Gordon Clark, Senior Vice President-Sales; and David F.
Merrion, Senior Vice President-Engineering.
This section also includes a report of the board's Compensation Committee
(see page 7), which discusses the general compensation principles used by the
committee, as well as the specific factors used to determine Mr. Penske's and
Mr. Koci's compensations.
SALARY AND BONUS
Messrs. Penske, Koci, Allran and Merrion had their salaries reviewed in
1996. This is consistent with the company's compensation principles for
executive officers (which is described in more detail in the Compensation
Committee's Report), since their salaries were last reviewed in late 1994. Mr.
Penske received a 12.5% salary increase in 1996, while Messrs. Koci, Allran and
Merrion each received an approximately 9.5% increase.
Messrs. Penske and Koci did not receive any bonuses for 1996. Messrs.
Allran and Merrion received bonuses for 1996 that were approximately 82% less
than their 1995 bonuses.
Mr. Clark is compensated under an employment contract, and his salary did
not change, nor did he receive a bonus, in 1996.
You will find additional information regarding this group's salaries and
bonuses in Appendix C.
STOCK OPTIONS
There were no options awarded in 1996. You will find additional information
regarding options held by this group of executive officers in Appendix C.
OTHER COMPENSATION AND BENEFITS
This group of executive officers receives medical, group life insurance and
other benefits (including matching contributions under the company's 401(k)
plans) that are available generally to all of the company's salaried employees.
They also participate in the company's salaried employees pension plan, which is
qualified under Section 401(a) of the Internal Revenue Code, and receive certain
other perquisites.
You will find additional information regarding the other compensation and
benefits in Appendix C.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has oversight over the
company's executive compensation program and approves the base salaries and
incentive bonuses of the senior executive officers. For 1996, the Compensation
Committee was composed of John E. Doddridge (Chairman), William E. Hoglund and
Helmut Werner.
EXECUTIVE COMPENSATION -- PHILOSOPHY AND PROGRAM COMPONENTS
The company's philosophy is to provide a comprehensive compensation program
to attract, retain and reward key members of management who contribute to the
company's success and to motivate the management team in the development and
execution of current and long-term business strategies and goals. The three
primary components of executive compensation are: base salary, cash bonuses and
stock incentives. A combination of stock grants and options are made available
to key employees under the Detroit Diesel Corporation 1993 Stock Incentive Plan
(the "SIP"). Executives also participate in certain benefit plans available to
all salaried employees. Certain senior executives can defer all or a portion of
bonus awards to provide them with flexible finance planning. The company
believes that a significant portion of the executive officers' compensation
should be placed at risk and, in keeping with that objective, a substantial
portion of the compensation package is comprised of a performance-based cash
bonus. Incentive stock options awarded from time to time under the SIP are
another important risk-related compensation element. The Company believes that
employee ownership of the company's stock is one of the most effective ways to
align employee and stockholder interests in the mutual goal of creating
stockholder value. During 1996, the committee directed management to submit a
proposal to establish guidelines for recommended stock ownership for key members
of management.
In 1996, base salaries for senior executive officers were based upon the
individual's responsibilities, experience and expected performance, taking into
account, among other things, the individual's initiative, contributions to the
company's overall performance, managerial ability and handling of special
projects. These same factors are applied by the Chairman and President, with the
assistance of the senior executive officers and the personnel administration
department, to establish base salaries for other key management employees. Base
salaries for senior executives generally are reviewed every 18 months for
possible adjustment, but are not necessarily changed that often. The committee
also uses industry comparisons to ensure that the base salaries of the senior
executive officers remain competitive in keeping with the objective of retaining
key members of management.
Consistent with prior practice, in early 1996, the committee approved the
establishment of a bonus pool for key management employees based on the
company's profitability during the 1996 calendar year. The calculation of
earnings for this purpose is based on 5% of the company's earnings before
interest and taxes, with adjustments for certain extraordinary items. The bonus
pool is divided among the key management employees, including the senior
executive officers, based upon each individual's contribution to the company's
overall business results, the performance of the business area for which the
manager or senior executive has direct responsibility, and the attainment of
corporate goals. The Compensation Committee reviewed the 1996 bonus awards to
the senior executive officers which were recommended by the Chairman and the
President based upon subjective performance reviews, and the committee approved
them without change.
In September 1993, the company adopted the SIP. The stated purpose of the
SIP is to provide financial incentives to selected key management employees of
the company and its subsidiaries to promote long-term growth and financial
success of that group by (i) attracting and retaining employees of outstanding
ability (ii) strengthening that group's capability to develop, maintain and
direct a competent management team, (iii) providing an
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effective means for that group to acquire an ownership interest in the company,
(iv) motivating key employees to achieve long-range performance goals and
objectives and (v) providing incentive compensation competitive with other
similar companies. The Compensation Committee administers the SIP and makes
grants under this plan, except that the full board of directors makes grants to
senior executive officers who are also directors. All grants under the SIP are
approved by a majority of the members of the Committee or the Board of
Directors, as the case may be, who are "disinterested persons" as that term is
used in Rule 16b-3 of the Securities and Exchange Commission. Awards under the
SIP can consist of incentive stock options, nonqualified stock options, stock
appreciation rights, restricted stock awards, unrestricted stock awards and
deferred stock awards.
Grants under the SIP were made in 1993 and again in 1995. In 1996, the
committee did not make any awards under the SIP.
At various times in the past, the company has adopted certain broad-based
employee benefit plans in which the senior executive officers and other key
management employees have been permitted to participate, including the salaried
employees' pension plan, the salaried employees' 401(k) savings plan with
certain marketing company contributions, and the life, health and disability
benefit plans available to all salaried employees. Key management employees also
receive a company provided automobile for business and personal use and some
senior executives are eligible for certain other perquisites. Other than with
respect to common stock held as an investment option under the 401(k) savings
plan, benefits under these plans are not directly or indirectly tied to company
performance.
CHIEF EXECUTIVE OFFICER COMPENSATION
For fiscal year 1996, no bonus was paid to Mr. Penske. As with all senior
executive officers, Mr. Penske's bonus compensation is linked to individual
performance and the Company's profitability. In 1995, the committee approved a
bonus plan for the chief executive officer based on the company's pre-tax
earnings. As a result of the disappointing 1996 earnings results, however, the
Chairman and the President declined bonus awards that would have otherwise been
approved by the Compensation Committee.
By the Compensation Committee:
John E. Doddridge (Chairman)
William E. Hoglund
Helmut Werner
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CERTAIN STOCKHOLDERS
You will find additional information regarding Penske Corporation and
Diesel Project Development in Appendix B.
DIESEL PROJECT DEVELOPMENT AND ITS AFFILIATES
In 1996, the company and its affiliates had business relationships with
Diesel Project Development and its affiliates, including Mercedes-Benz, MTU
Motoren- und Turbinen-Union Friedrichshafen GmbH, and Freightliner Corporation.
Under the company's financing agreement with Diesel Project Development,
DDC Holdings, Inc. (a subsidiary of Penske Corporation) has agreed to vote for
the election to the company's board of a number of nominees designated by Diesel
Project Development in proportion to Diesel Project Development's percentage
interest in the total number of outstanding shares of the company's stock. One
Diesel Project Development nominee will also be a member of the board's
Compensation Committee. Diesel Project Development has agreed to vote its shares
of the company's stock for DDC Holdings' nominees, consistent with Diesel
Project Development's rights to board representation.
Dr. Eckhard Cordes and Dr. Kurt J. Lauk are the nominees of Diesel Project
Development serving on the board pursuant to this voting agreement. Dr. Cordes
is a member of the board's Compensation Committee. Under the financing
agreement, Diesel Project Development's consent is required on significant
business matters, including the company's business plan, certain debt and equity
issuances, acquisitions and major investments, and transactions with affiliates.
The company paid Mercedes-Benz and its affiliates $4 million in 1996 for
prototype parts related to the development of the Series 2000 engine, service
parts pursuant to a North American distribution agreement for parts and service
for certain Mercedes-Benz industrial diesel engines, production parts for the
Series 55 engine and other miscellaneous items. The company sold engines and
related parts to Freightliner totaling approximately $395 million in 1996.
In 1996, the company paid MTU $44 million for engine blocks for the Series
149 engine, prototype parts and engines related to the development of the Series
2000 and 4000 engines, and engines and service parts pursuant to an interim
distribution agreement for MTU products and services in North America.
The company and MTU also entered in an agreement in 1996 to design and
develop an engine for the United States Marine Corps Advanced Amphibious Assault
Vehicle. The company will pay MTU approximately $31 million under the contract
through 2000, however, the United States Marine Corps will reimburse the company
for all of these amounts. In 1996, the company paid MTU approximately $950,000,
all of which has been reimbursed.
PENSKE CORPORATION AND ITS AFFILIATES
The company and its affiliates had business relationships with Penske
Corporation and its affiliates, including Diesel Technology Company, in 1996.
The company paid $94 million to Diesel Technology for products. The company also
paid approximately $7 million in 1996 to affiliates of Penske Corporation for
vehicle lease charges, office rent, charges associated with the use of aircraft,
the use and acquisition of demonstration products, and for various miscellaneous
services. The Company sold products to these companies and rendered
miscellaneous services for which it was paid $310,000 in 1996.
By Order of the Board of Directors
MARY LOU PERNICANO
Secretary
Dated: March 25, 1997
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APPENDIX A -- PERFORMANCE GRAPH
The following graph compares the cumulative total return on the company's
common stock with the cumulative total return on the New York Stock Exchange
Composite Index and the Standard & Poor's Heavy-Duty Trucks & Parts Index. The
comparisons in this table are required by the Securities and Exchange Commission
and are not intended to forecast or be indicative of possible future performance
of the common stock or the referenced indexes.
COMPARISON OF CUMULATIVE TOTAL RETURN
FOR THE PERIOD FROM OCTOBER 7, 1993 TO DECEMBER 31, 1996
MEASUREMENT PERIOD DETROIT NYSE S&P HEAVY-
(FISCAL YEAR COVERED) DIESEL COMPOSITE DUTY TRUCKS
CORPORATION INDEX & PART S
INDEX
10/7/93 100.00 100.00 100.00
12/31/93 180.00 101.28 105.04
12/30/94 106.90 98.10 88.38
12/29/95 93.15 128.81 91.53
12/31/96 115.00 153.36 110.78
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APPENDIX B -- STOCKHOLDINGS
This Appendix B contains stockholding information for persons known to the
company to own five percent or more of the company's common stock, the nominees
for election as directors, the directors continuing in office, and the company's
executive officers.
Ownership of the company's common stock is shown in terms of "beneficial
ownership." A person generally "beneficially owns" shares if he has either the
right to vote those shares or dispose of them. More than one person may be
considered to beneficially own the same shares.
In this proxy statement, unless otherwise noted, a person has sole voting
and dispositive power for those shares shown as beneficially owned by him.
Shares shown as beneficially owned by the company's executive officers includes
shares that they have the right to acquire by exercising options on or before
May 15, 1997. The percentages shown in this proxy statement compare the person's
beneficially owned shares with the total number of shares of the company's
common stock outstanding on March 14, 1997 (24,698,816 shares).
CERTAIN STOCKHOLDERS
The following table shows the beneficial ownership of the company's common
stock as of March 14, 1997, for persons known to the company to own five percent
or more of the company's common stock.
SHARES
BENEFICIALLY OWNED
---------------------
NAME AND ADDRESS NUMBER PERCENT
---------------- ------ -------
Penske Corporation.......................................... 11,240,000 46%
13400 Outer Drive, West
Detroit, Michigan 48239
Diesel Project Development, Inc. ........................... 4,935,361 20%
1201 North Market Street, 14th Floor
Wilmington, Delaware 19801
The shares shown in this table as beneficially owned by Penske Corporation
may also be considered to be beneficially owned by Roger S. Penske, although Mr.
Penske disclaims beneficial ownership. DDC Holdings, Inc., a wholly-owned
indirect subsidiary of Penske Corporation, is the record owner of this common
stock. Mr. Penske, who may be considered to beneficially own approximately 60%
of Penske Corporation's stock, is a director and the chief executive officer of
Penske Corporation and DDC Holdings. Mr. Penske also beneficially owns 80,500
shares of the company's common stock. DDC Holdings' address is 1105 North Market
Street, Suite 1300, Wilmington, Delaware 19801. Mr. Penske's address is 13400
Outer Drive, West, Detroit, Michigan 48239.
The shares shown in this table as beneficially owned by Diesel Project
Development, Inc. may also be considered to be beneficially owned by
Daimler-Benz AG, since Diesel Project Development is a wholly-owned indirect
subsidiary of Daimler-Benz. Daimler's address is Epplestrasse 225, 70546
Stuttgart, Germany.
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NOMINEES, CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following table contains stockholding information for the nominees for
election as directors, the directors continuing in office, and the company's
executive officers.
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
TERM TO ------------------
NAME AGE POSITIONS WITH COMPANY EXPIRE NUMBER PERCENT
---- --- ---------------------- ------- ------ -------
NOMINEES FOR ELECTION AS DIRECTORS
Gary G. Jacobs................. 55 Director 2000 3,800 *
Timothy D. Leuliette........... 47 Vice Chairman and Director 2000 0 *
Joseph F. Welch................ 62 Director 2000 1,000 *
R. Jamison Williams, Jr........ 55 Director 2000 3,000 *
DIRECTORS CONTINUING IN OFFICE
John E. Doddridge.............. 56 Director 1998 1,000 *
Dr. Eckhard Cordes............. 46 Director 1999 0 *
William E. Hoglund............. 62 Director 1999 2,000 *
Ludvik F. Koci................. 60 President and Director 1998 117,643 *
Dr. Kurt J. Lauk............... 50 Director 1998 0 *
Roger S. Penske................ 60 Chairman and Director 1999 80,500 *
OTHER EXECUTIVE OFFICERS
Senior Vice President -
Robert R. Allran............... 54 Operations -- 43,824 *
A. Gordon Clark................ 74 Senior Vice President - Sales -- 11,005 *
Senior Vice President -
David F. Merrion............... 60 Engineering -- 43,824 *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (16 PERSONS) 365,635 1.48%
- ---------------
* Under 1%.
The amount shown in this table for Mr. Penske includes 3,000 shares owned
by Mr. Penske as custodian for three of his children, but does not include
shares for which Mr. Penske disclaims beneficial ownership: 11,240,000 shares
owned by DDC Holdings and 1,000 shares owned by his wife. The amounts shown for
Dr. Cordes and Dr. Lauk do not include 4,935,361 shares of common stock owned by
Diesel Project Development for which each disclaims beneficial ownership.
For the executive officers, the amounts shown in the table include shares
that they have the right to acquire upon exercising options on or before May 15,
1997, as follows: Mr. Penske -- 50,000 shares; Mr. Koci -- 50,000 shares; Mr.
Allran -- 10,000 shares; Mr. Clark -- 10,000 shares; and Mr. Merrion -- 10,000
shares. The executive officers, as a group, have the right to acquire 146,750
shares of the common stock upon exercising options on or before May 15, 1997.
The amounts shown for Messrs. Koci, Allran and Merrion also includes
restricted stock awards (Mr. Koci -- 6,153 shares; Mr. Allran -- 3,076 shares;
and Mr. Merrion -- 3,076 shares) and deferred stock awards (Mr. Koci -- 41,024
shares; Mr. Allran -- 20,512 shares; and Mr. Merrion -- 20,512 shares). The
restricted stock awards vest in equal annual increments through October 1997.
The deferred stock awards are already vested and will be issued to a person 90
days after termination of his employment. Until issued, these persons have no
voting or disposition rights on their deferred stock.
Mr. Penske may be considered to beneficially own 2,060,258 shares, Mr.
Clark 7,000 shares, Mr. Leuliette 20,000 shares, and Mr. Williams 34,277 shares
of Penske Corporation's common stock, while the company's directors and
executive officers, as a group, may be considered beneficially to own 2,138,397
shares.
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APPENDIX C -- EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides compensation information for the fiscal years
1996, 1995 and 1994 for the company's chief executive officer -- Roger S. Penske
- -- and the four most highly compensated executive officers other than Mr. Penske
- -- Ludvik F. Koci, Robert R. Allran, A. Gordon Clark and David F. Merrion.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
--------------------------- ------ ------ ----- ------------ ---------- ------------
Roger S. Penske.............. 1996 $450,000 $ 0 0 0 0
Chairman 1995 $400,000 $460,000 0 25,000 0
1994 $362,500 $460,000 0 0 0
Ludvik F. Koci............... 1996 $415,000 $ 0 $138,269 0 $ 9,750
President 1995 $375,000 $455,000 $101,619 25,000 $ 9,750
1994 $343,750 $455,000 $134,115 0 $11,818
Robert R. Allran............. 1996 $215,000 $ 35,000 $ 84,992 0 $ 9,750
Senior Vice President - 1995 $195,000 $200,000 $ 50,810 5,000 $ 9,750
Operations 1994 $190,833 $185,000 $ 67,047 0 $11,818
A. Gordon Clark.............. 1996 $350,000 0 $ 52,243 0 $ 9,750
Senior Vice President - Sales 1995 $347,917 0 $ 54,021 5,000 $ 9,750
1994 $322,917 0 $ 48,182 0 $11,818
David F. Merrion............. 1996 $210,000 $ 35,000 $ 89,639 0 $ 9,750
Senior Vice President - 1995 $190,000 $200,000 $ 50,810 5,000 $ 9,750
Engineering 1994 $185,833 $185,000 $ 67,047 0 $11,818
The compensation described in this table does not include medical, group
life insurance or other benefits that are available generally to all of the
company's salaried employees. It also does not include certain perquisites and
other personal benefits, securities or property received by these executive
officers, not material in amount.
The "Salary" column includes salary reduction elections made under the
company's 401(k) plan for salaried employees and its flexible benefits plan. The
"Other Annual Compensation" column includes for all years for Messrs. Koci,
Allran and Merrion, reimbursements for taxes associated with the vesting of
restricted stock; for 1996 for Messrs. Koci, Allran and Merrion, imputed income
associated with a company-provided vehicle; and for all years for Mr. Clark,
imputed income associated with a company-provided vehicle and company-provided
life insurance. The "All Other Compensation" column includes the company's
matching contributions under the company's 401(k) plan.
Mr. Clark has an employment agreement with the company at an annual salary
of $350,000 through January 1, 1998, when the agreement terminates.
On December 31, 1996, Mr. Koci owned 12,307 shares of restricted stock
valued at $229,279, and Messrs. Allran and Merrion each owned 6,153 shares of
restricted stock valued at $114,630. For this valuation, each share of
restricted stock was valued at $23.00, the closing market price of the company's
common stock on December 31, 1996. Cash in lieu of dividends, if any, is payable
on the restricted stock.
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OPTION VALUES AT FISCAL YEAR END
The following table shows the number of shares covered by both exercisable
and non-exercisable stock options held by Messrs. Penske, Koci, Allran, Clark
and Merrion as of December 31, 1996. This table also shows the value on that
date of their "in-the-money" options, which is the positive spread, if any,
between the exercise price of existing stock options and $23.00 per share (the
closing market price of the common stock on December 31, 1996). No options were
exercised in 1996 by any of these persons.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
(#) ($)
------------------------------ ------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
Roger S. Penske.......................... 50,000/25,000 $112,500/$37,500
Ludvik F. Koci........................... 50,000/25,000 $112,500/$37,500
Robert R. Allran......................... 10,000/ 5,000 $22,500/$ 7,500
A. Gordon Clark.......................... 10,000/ 5,000 $22,500/$ 7,500
David F. Merrion......................... 10,000/ 5,000 $22,500/$ 7,500
EMPLOYEE BENEFIT PLAN
The company maintains the Detroit Diesel Corporation Employees' Pension
Plan (the "Salaried Plan"), under which salaried employees of the company are
eligible to participate on the first of the month following 30 days of
employment. The Salaried Plan is qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and is a defined benefit plan of
the type known as a "cash balance plan." Each payroll period during the plan
year, the company credits to a participant's hypothetical account an amount
equal to 6.25% of the participant's annual base salary; the participant's
account is increased annually at an indexed rate of interest, based on the rate
of return for one-year U.S. Treasury Bills. Upon retirement, a participant may
elect to receive the value of his account in a lump sum or installments or in
the form of an annuity. A minimum benefit is payable under the Salaried Plan
equal to 1.31% of the participant's highest five year average annual
compensation during the participant's last ten years of employment times his
years of service, plus 0.32% of average annual compensation in excess of two
times his "covered compensation" (based on Social Security wages), times his
years of service (up to a maximum of 35 years). The compensation covered by the
Salaried Plan is a participant's base pay during a calendar year. A
participant's compensation covered under the Salaried Plan is generally the same
as that shown in the "salary" column of the Summary Compensation Table. However,
pursuant to Section 401(a)(17) of the Code, the amount of compensation that can
be considered in computing benefits under the Salaried Plan was $150,000 for
1995, is $150,000 for 1996, will be $160,000 for 1997, and, under current law,
will be raised in $10,000 increments in succeeding years by annual
cost-of-living adjustments determined by the U.S. Secretary of the Treasury. In
addition to the benefit based upon service with the company, participants who
formerly worked for General Motors will receive a benefit based on General
Motors service and the formula in the General Motors Pension Plan as in effect
on December 31, 1987, and the participant's average annual compensation at the
time of retirement or termination of employment.
The estimated annual benefits payable upon retirement, including the amount
of the benefit based on any General Motors service (based on an expected
retirement age of 65, straight life form of payments and deductions for social
security) are for Mr. Koci -- $120,000, Mr. Allran -- $115,731, Mr. Clark --
$18,855, and Mr. Merrion -- $103,204. Credited years of service under the
Salaried Plan as of December 31, 1996, are for Mr. Koci -- 42 years, Mr. Allran
- -- 31 years, Mr. Clark -- 8 years, and Mr. Merrion -- 42 years.
Participants become 100% vested upon completion of five or more years of
service, or upon the attainment of age 65 or death while in the employ of the
company.
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PROXY
DETROIT DIESEL CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
APRIL 29, 1997
THIS PROXY IS SOLICITED ON BEHALF OF DETROIT DIESEL CORPORATION'S BOARD OF
DIRECTORS.
The undersigned hereby appoints Roger S. Penske and J. Randall Lawrence,
and each of them, proxies for the undersigned, with full power of substitution,
to vote all shares of Detroit Diesel Corporation Common Stock which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
Detroit Diesel Corporation, in Ft. Lauderdale, Florida, on Tuesday, April 29,
1997 at 9:00 a.m., or at any adjournment thereof, upon the matters set forth on
the reverse side and described in the accompanying Notice of Annual Meeting and
Proxy Statement and upon such other business as may properly come before the
meeting or any adjournment thereof.
Employees participating in the company's employee's savings plans may use
this proxy to instruct the plan trustees how to vote the shares held for such
employees, and the trustees will vote such shares, subject to the applicable
plan, in accordance with such instructions. The trustees will vote any shares
for which they do not receive instructions in the same proportion as they vote
the shares for which they receive instructions.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY
ITEM. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS, PLEASE SIGN AND DATE THE REVERSE SIDE; NO BOXES NEED TO BE
CHECKED.
[COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE]
(Continued and to be signed on other side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2
WITHHELD
FOR FOR ALL
ITEM 1--ELECTION OF DIRECTORS / / / /
Nominees:
Gary G. Jacobs
Timothy D. Leuliette
Joseph F. Welch
R. Jamison Williams, Jr.
WITHHELD FOR: (WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW)
Please mark your votes as indicated in this example /X/
Item 2--APPROVAL OF DELOITTE & TOUCHE AS AUDITORS FOR AGAINST ABSTAIN
/ / / / / /
I PLAN TO ATTEND MEETING / /
COMMENTS/ADDRESS CHANGE / /
Please mark this box if you have written comments/address change on the reverse
side.
RECEIPT IS HEREBY ACKNOWLEDGED OF THE DETROIT DIESEL CORPORATION NOTICE OF
ANNUAL MEETING AND PROXY STATEMENT.
SIGNATURES _________________________________________ DATE _________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.