General Motors Corp. plans to eliminate 25,000 manufacturing jobs in the United States by 2008 and close plants as part of a strategy to revive North American business at the world's largest automaker, its chairman said today.
WILMINGTON, Del. — General Motors Corp. plans to eliminate 25,000 manufacturing jobs in the United States by 2008 and close plants as part of a strategy to revive North American business at the world’s largest automaker, its chairman said today.
Speaking to shareholders at GM’s 97th annual shareholder meeting in Delaware, Chairman and Chief Executive Rick Wagoner said the capacity and job cuts should generate annual savings of roughly $2.5 billion. GM now employs 110,000 hourly workers in the United States.
Wagoner revealed the cutbacks as he laid out a four-step strategy to invigorate GM’s North American operations, its biggest and most troubling part. Already this year, GM’s U.S. market share has fallen from 27 percent a year ago to 25.4 percent, much of the loss at the expense of Asian automakers such as Toyota Motor Corp. and Nissan Motor Co.
Wagoner focused on four priorities: increasing spending on new cars and trucks; clarifying the role of each of GM’s eight brands; intensifying efforts to reduce costs and improve quality; and continuing to search for ways to reduce skyrocketing health care expenses.
He noted that health-care expenses add $1,500 to the cost of each GM vehicle. This puts GM at a “significant disadvantage versus foreign-based competitors,” Wagoner said.
General Motors shares rose 53 cents, or 1.7 percent, to $30.95 in late morning trading on the New York Stock Exchange. GM’s shares have tumbled to their lowest price in more than a decade, and Fitch Ratings and Standard and Poor’s Ratings Services both reduced the company’s bond rating to “junk” status last month.
Billionaire investor Kirk Kerkorian’s offer to purchase 28 million GM shares at $31 apiece, boosting his stake to about 9 percent from 4 percent, expires later today.
Wagoner said it was vital for the company to cut costs by improving efficiency at its manufacturing plants. He said plant closings and idlings in recent months will reduce assembly capacity in North America from 6 million in 2002 to 5 million by the end of this year.
GM spokesman Edd Snyder said the company wouldn’t release further details today about which plants might be closed.
“What was contained in the speech is what we have right now,” Snyder said.
Messages were left this morning with the United Auto Workers.
GM already has closed or discontinued production at several facilities this year. The company shut a factory in Linden, N.J., in April and a factory in Baltimore in May, affecting around 2,000 employees. The company also closed two plants in Lansing, Mich., last month, although those 3,500 employees are expected to find work at other GM facilities in the city.
“Let me say up front that our absolute top priority is to get our largest business unit back to profitability as soon as possible,” Wagoner said.
Part of that bid involves negotiating with the UAW and other unions, discussions that are ongoing.
Wagoner said the talks, which he described as intense, have focused on a cooperative approach to significantly reduce GM’s health care costs. GM’s health care tab for its 1.1 million current and former workers and their families is more than $5 billion a year and rising.
“We have not reached an agreement at this time, and to be honest, I’m not 100 percent that we will,” Wagoner said of the ongoing talks with its unions. “But all parties are working hard on it, in the spirit of addressing a huge risk to our collective futures while providing greater security and good benefits for our employees.”
To date, the UAW has indicated it won’t reopen its contract, which expires in 2007, and agree to pick up a larger share of soaring health care costs.
What happens if GM can’t reach an agreement with the UAW promptly?
“I don’t believe it serves a useful purpose to speculate on that,” said Wagoner, the CEO since 2000 and chairman since 2003.
“Let me just emphasize our very strongly preferred approach is to do this in cooperation with the UAW because we’re convinced that’s the best way for our employees, stockholders and all our constituents,” he said.
Aside from growing health care and pension costs, GM has had lackluster sales lately of its highly profitable trucks and sport utility vehicles, which have been hurt by high fuel prices.
GM’s sales were down 5 percent in the first five months of the year, and the automaker reported a $1.1 billion loss in the first quarter.