GM to Cut 30,000 Jobs by 2008,
Expects $7 Billion in Savings
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
November 21, 2005 12:17 p.m.
DETROIT -- General Motors Corp. announced Monday a restructuring of its manufacturing operations in the U.S. and Canada as well as major job reductions as part of a comprehensive plan to return the company to profitability and long-term growth.
In a news release, GM Chairman and Chief Executive Rick Wagoner said the auto maker will eliminate 30,000 manufacturing positions through 2008. GM will also shut down nine assembly, stamping and powertrain facilities and three service and parts operations. The plan is to achieve $7 billion in annual cost reductions by the end of 2006 -- $1 billion above its previously indicated target.
The moves would further GM's effort in North America to streamline its capacity utilization, a major component of reducing structural cost. The announcement represents 5,000 more job cuts than the 25,000 that the auto maker had previously indicated. GM's world-wide work force is about 325,000.
The additional actions will reduce GM's North American assembly capacity by about one million units by the end of 2008, in addition to the previously implemented reduction of one million units between 2002 and 2005. GM sold nine million vehicles in 2004 but has seen its leading U.S. market share steadily erode.
UAW Calls Plan 'Unfair'
The United Auto Workers said in response to the announcement that negotiations with the auto maker would be more difficult.
"Today's action by General Motors is not only extremely disappointing, unfair and unfortunate, it is devastating to many thousands of workers, their families and their communities. While GM's continuing decline in market share is not the fault of workers or our communities, it is these groups that will suffer because of the actions announced today," the union said in a statement.
The UAW said it will do "everything in its power" to enforce job security and protect the interests of the workers impacted by GM's action.
GM has been crippled by high labor, pension, health-care and materials costs as well as by sagging demand for sport-utility vehicles, its longtime cash cows, and by bloated plant capacity. Its market share has been eroded by competition from Asian auto makers led by Toyota Motor Corp. GM lost nearly $4 billion in the first nine months of this year, sparking speculation that the company might have to file for bankruptcy-court protection.
"The decisions we are announcing today were very difficult to reach because of their impact on our employees and the communities where we live and work," Mr. Wagoner said. "But these actions are necessary for GM to get its costs in line with our major global competitors. In short, they are an essential part of our plan to return our North American operations to profitability as soon as possible."
He added: "We continue to be equally committed to revenue drivers -- introducing compelling new cars and trucks, and executing our revitalized sales and marketing strategy -- and we have received ratification of the agreement with the UAW, which will help significantly to address our health-care cost challenges. We are making steady and significant progress in implementing the plan to turn around our U.S. business."
GM's shares rose less than 1% after the announcement this morning on the New York Stock Exchange.
GM said the assembly plants that will close are in Oklahoma City, Lansing, Mich., Spring Hill, Tenn., Doraville, Ga., and Ontario, Canada. An engine facility in Flint, Mich., will close, along with a separate powertrain facility in Ontario and metal centers in Lansing and Pittsburgh.
Mr. Wagoner said GM also will close three service and parts operations facilities. They are in Ypsilanti, Mich., and Portland, Ore., and one unidentified site. A shift also will be removed at a plant in Moraine, Ohio.
GM plans to achieve much of the job reduction via attrition and early retirement programs. The company said there will be a significant restructuring charge relating to the capacity announcement and the early-retirement program.
Material Costs Also Targeted
Mr. Wagoner said the company has further accelerated its efforts in structural cost reduction, raising the previously indicated $5 billion running rate cost-reduction plan in North America to $6 billion by the end of 2006. In addition, GM continues to pursue its plans to target $1 billion in net material cost savings. In total, the plan is to achieve $7 billion of cost reductions on a running rate basis by the end of 2006.
"Our collective goal remains the same: to return our North American operations to sustained profitability as soon as possible, thereby helping to ensure a strong General Motors for the future," Mr. Wagoner said.
Mr. Wagoner said last month the auto maker would announce plant closures by year end to get its capacity in line with U.S. demand. GM plants currently run at 85% of their capacity, lower than North American plants run by its Asian rivals. The plant closings aren't expected to be final until GM's current contract with the UAW expires in 2007.
On top of its other woes, the auto maker could be facing a strike at Delphi Corp., its biggest parts supplier, which filed for bankruptcy protection last month. GM spun off Delphi in 1999 and could be liable for billions in pension costs for Delphi retirees. GM also is under investigation by the U.S. Securities and Exchange Commission for accounting errors.
Last week, after the auto maker's shares fell to their lowest level in 18 years, Mr. Wagoner sent an e-mail to employees saying the company has a turnaround strategy in place and has no plans to file for bankruptcy.
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