|GM CEO Rick Wagoner detailed the company's job-cut plans but declined to say when the troubled automaker might return to profitability.|
NEW YORK (CNNMoney.com) -
General Motors Corp. said Monday it would cut 30,000 hourly jobs and close or scale back operations at about a dozen U.S. and Canadian locations in a bid to save $7 billion a year and halt huge losses in its core North American auto operations.
The cuts are 5,000 more than the 25,000 jobs GM had said it would cut in June, and represent more than 22 percent of its union work force in North America. Many of the cuts would start next year, GM said Monday, despite job protection provisions in its union contract that runs through September 2007.
GM Chairman and CEO Rick Wagoner said he expects another 7 percent of salaried workers in North America would also be cut by the end of 2006, though he gave no specific number of job cuts planned there. Seven percent would equal about 2,500 jobs in the United States and additional cuts in Canada as well.
The automaker said the plan is aimed at saving $7 billion a year by the end of 2006.
Wagoner said the cuts were what the troubled automaker needed to turn around its operations but he wasn't ready to predict when GM will return to profitability. He also wouldn't promise this would be the end of job cuts and plant closings.
"As we sit here today, it's our best guess and well thought out analysis," Wagoner said.. "If we've learned anything in the last five years, it's that there's no guarantees in this business or any other business."
Not surprisingly, the leadership of the United Auto Workers union blasted the move as unfair.
"We have said consistently that General Motors cannot shrink itself to prosperity. In fact, shrinking General Motors only exacerbates its problems," UAW President Ron Gettelfinger and Vice President Richard Shoemaker said in a joint statement. "Unfortunately, it is workers, their families and our communities that are being forced to suffer because of the failures of others," they added. (Full story).
Wagoner said he had received support from the company's board of directors and from its employees as he moved forward with the cutback plans and that he had no plans to leave the company. Some investors and analysts have lost confidence in Wagoner given the company's spate of troubles this year. (Full story).
"I've given no thought to anything but turning the business around," Wagoner told reporters, adding that he believes his experience with GM should help him lead that effort. "I wasn't brought up to run and hide when things get tough. I'm convinced that's the way that things get righted."
He said the moves were not due to any pressure by the board. "We're not taking these actions because of any pressure on me," he said. "We're taking these measures to get the business right."
Stock rallies, but ...
GM (down $0.58 to $23.47, Research) stock opened higher on the news but turned lower in afternoon trading as a growing number of investors and analysts said that while the plan addressed costs, it did not deal with the automaker's lackluster product offerings.
"The plan is essentially as expected, meaning not terribly aggressive," UBS analyst Rob Hinchliffe wrote in a note to clients, adding that the company's market share, which has been sliding, may fall further. He kept a sell rating on the stock and a price target of $20, below the current price.
In June, GM announced plans to trim 25,000 hourly jobs in its North American operations by the end of 2008 in an effort to stem losses. The company has lost $2.2 billion in the first three quarters of this year, excluding special items. Most of those losses, about $1.6 billion, have come at its core North American auto operations.
The company's contract with the United Auto Workers union essentially prevents layoffs before it expires in September 2007, as the company needs to pay union members whether or not there is a job for them.
Wagoner said that some kind of buyout would likely be offered to speed up the job cuts, but that until the buyout packages are worked out with the union, the company can't say how many of the job cuts would come through retirement and how much through buyouts.
The assembly plants being closed are in Oklahoma City, Lansing, Mich., and Doraville, Ga., with the first two closing next year and Doraville slated to shut in 2008.
Some shifts will be eliminated at three other assembly plants, including Line 1 at Spring Hill, Tenn., and Oshawa, Ontario, Car Plant No. 2, which will both be shut, although assembly plants on the same property will continue to operate.
Other facilities to be closed include stamping plants in Lansing, Mich., next year and in Pittsburgh in 2007, along with two powertrain plants, in St. Catharines, Ontario, and Flint, Mich., in 2008.
And the company will shut three parts facilities in Portland, Ore., Ypsilanti, Mich., and St. Louis by 2007. One other parts facility yet to be identified will also be closed.
With the announced closings, GM is essentially keeping its capacity of large sport utility vehicles and pickups intact, even though big SUVs sales have slumped in recent months in the face of higher gasoline prices.
Wagoner said he believed that a new line of large SUVs due early in 2006 should give a lift to those sagging sales, and that some of its large SUV capacity is being changed to produce either SUVs or pickups, depending upon demand. He said GM needs to keep capacity for the vehicles that it can sell at the greatest profit -- namely the larger vehicles.
Among the vehicles made at the assembly plants being closed are the Chevrolet Impala and its twins, the Saturn Ion, its minivans, the SSR sport pickup and some mid-sized SUVs. The company will have a North American capacity of about 4.2 million vehicles a year at its own plants, down from about 5 million.
"Oklahoma City, (which makes the mid-sized SUV) is a very good plant but a classic example of ... just having too much capacity in that segment," said Wagoner. "That's why that plant in on the list today. We don't have any plants left that aren't very high quality and quite productive. I'm sure I'm not going to satisfy any plant as why they've been chosen to be on the list."
For a look at the perfect storm of problems hitting GM, click here.
For a look at the rocky outlook for GM sales going forward, click here.
For a look at other news about autos and automakers, click here.