$7 billion in cuts to idle thousandsGM turnaround plan will lay off 30,000 by 2008, close 12 sitesFrom
Beacon Journal wire services
DETROIT - The world's largest automaker announced its steepest cuts in 14 years on Monday, but by all accounts, the pain is not over.
General Motors Corp. said it would eliminate 30,000 jobs by 2008. In Ohio, 1,050 of those jobs will come from a plant in Moraine, near Dayton.
Still, the company -- whose debt is at ``junk'' status, whose shares are close to their lowest level since 1987 -- is not on stable ground.
GM shares have fallen more than 40 percent this year as whispers of bankruptcy swirl.
The rumors have become so loud, Chairman and CEO Rick Wagoner rushed his turnaround plan and issued Monday's announcement earlier than planned.
The toll: 12 facilities will be hit. The cuts directly affect 17 percent of GM's North American hourly and salaried work force of 173,000.
``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,'' Wagoner said. ``But these actions are necessary for GM to get its costs in line with our major global competitors.''
At the assembly plant in Moraine, GM intends to eliminate the third shift.
About 4,150 workers are employed at the plant, which produces the Buick Rainier, GMC Envoy, Chevrolet Trailblazer, Saab 9-7X and Isuzu Ascender.
GM spokesman Dan Flores said it is too early to tell whether the affected workers will be offered other jobs or transfers.
It's unclear how much help GM can count on from its unions in its struggle. The United Auto Workers called GM's plan ``devastating'' and warned negotiations will be more difficult.
``Workers have no control over GM's capital investment, product development, design, marketing and advertising decisions. But, unfortunately, it is workers, their families and our communities that are being forced to suffer because of the failures of others,'' UAW President Ron Gettelfinger and Vice President Richard Shoemaker said in a joint statement.
GM isn't the only U.S. automaker cutting costs. Last week, Ford Motor Co. told employees it plans to eliminate about 4,000 white-collar jobs in North America early next year as part of a restructuring plan.
GM said the plant closings are part of a plan to shave $7 billion off its $42 billion annual bill for operations by the end of next year. That includes a $3 billion cut in health care costs, $1.5 billion in manufacturing cuts and $1 billion in savings on materials.
GM shares fell 47 cents, or nearly 2 percent, to close at $23.58 Monday on the New York Stock Exchange. They have traded in a 52-week range of $20.60 to $40.82.
Merrill Lynch analyst John Casesa said GM's plan leaves many questions unanswered, including what the company will do about its growing retiree burden. The automaker now has 2.5 retirees for every active worker.
``At some point this becomes an untenable situation and is the key reason that GM cannot shrink to a competitive size; that is, unless the current labor agreement is drastically revised,'' Casesa wrote in a note to investors.
Standard & Poor's Ratings Services, which lowered GM's debt to ``junk'' status earlier this year, said the company remains on credit watch. S&P said the staff cuts are substantial but may not be adequate considering GM's problems, including a possible strike at Delphi Corp., its largest supplier; an ongoing federal investigation into accounting errors; and an uncertain outlook for its new lineup of full-size sport utility vehicles, which may fall victim to consumer concerns about gas prices.
Goldman Sachs analyst Robert Barry said those headwinds could offset gains from the cuts.
``We are not confident the restructuring addresses the core issue that GM brings too much supply to the North American market,'' Barry said in a note to investors.
GM has 77 facilities in North America.
Wagoner said the job cuts will come primarily through attrition and early-retirement packages.
Some workers who don't choose to retire could go into job banks, which pay laid-off workers their salary and benefits. Wagoner said details about layoffs and early-retirement packages still need to be worked out with the UAW, the Canadian Auto Workers and other unions.
Earlier this month, GM's U.S. hourly workers agreed to pay more for their health care benefits, a concession UAW leaders said was necessary because of GM's financial status.
GM said assembly plants will close in Oklahoma City; Lansing, Mich.; Doraville, Ga.; and Oshawa, Ontario. One production line will close and one will stay open in Spring Hill, Tenn. In addition to Moraine, the company is removing shifts in Ontario.
An engine facility in Flint, Mich., will close, along with a separate powertrain facility in Ontario and metal centers in Lansing and Pittsburgh.
Wagoner said GM also will close three service and parts operations facilities. They are in Ypsilanti, Mich., Portland, Ore., and one other site to be announced later. |
