Updated from 3:01 p.m. EDT

Ford Motor ( F) said Thursday it will slice its dividend and directors' compensation in half as the struggling automaker continues efforts to slash costs.

The dividend step follows a similar move by Ford's larger rival, General Motors ( GM), which in February halved its dividend under pressure from shareholder activists and workers to adopt a policy of "shared sacrifice."

Ford's dividend cut represents a sacrifice from the Ford family, which owns a large stake in the company and controls a majority of the voting rights, but it's also a step toward cutting the company's bloated cost structure.

Ford plans to pay a third-quarter dividend of 5 cents a share, down from its 10-cent dividend for the second quarter. The new dividend is payable Sept. 1 to holders of record Aug. 2.

"Strong liquidity is an important enabler of our ongoing turnaround efforts, and this action will make an important contribution," said Chairman and Chief Executive Bill Ford in a statement.

In addition, the company said its board members voluntarily moved to cut their fees in half.

"Our directors are well aware of the difficulties and sacrifices involved in turning around our company," Ford said. "They have underscored this by voting to reduce their own compensation."

Ford has been seeking to slash costs after spiraling into the red last year as foreign-based manufacturers with lower cost structures took market share, all while soaring fuel prices depleted demand for Detroit's gas-guzzling SUVs. The No. 2 U.S. automaker unveiled a restructuring plan dubbed "Way Forward" earlier this year that calls for closing 14 North American factories and slashing up to 34,000 jobs over the next six years.

With roughly Ford's 1.8 billion shares outstanding, the dividend cut adds up to a savings of about $361 million.

"The dividend is where the Ford family generates their income, so it underscores the severity of the company's situation," said Argus Research analyst Kevin Tynan.

Shares of Ford closed down 32 cents, or 4.7%, to $6.56 Thursday. Its stock has missed out on the spectacular gains posted by GM this year after both companies had a disastrous performance last year. GM has so far led gains in the Dow Jones Industrial Average for 2006, up 49%. Currently, the company is exploring a landmark deal to partner with French automaker Renault and Japan's Nissan, which are both led by Carlos Ghosn.

Ford has no such option at the present time.

"The headwinds we faced at the beginning of 2006 have only become stronger, as consistently higher gasoline prices in the U.S. have caused consumer purchase preferences to shift away from SUVs and large trucks to smaller cars and crossover vehicles," Ford said. "While this shift plays positively to our new vehicle offerings, we must still get our costs in line in response to segment adjustments and higher commodity prices that are affecting the company."