In the past few weeks, General Motors has faced a drumbeat of bad news and bankruptcy whispers, putting Chairman and Chief Executive Rick...
DETROIT — In the past few weeks, General Motors has faced a drumbeat of bad news and bankruptcy whispers, putting Chairman and Chief Executive Rick Wagoner under considerable pressure to speed up his turnaround plan.
Wagoner sent employees a memo last week, assuring them bankruptcy isn’t on the radar at the world’s largest automaker. He took further action Monday, saying GM plans to cut 30,000 hourly jobs and close 12 facilities by 2008, including a distribution center in Portland.
The news had been planned for December, but the timetable was accelerated as GM stock hit an 18-year low.
Still, investors weren’t too satisfied. GM shares fell 47 cents, or nearly 2 percent, to close at $23.58 Monday. They have traded in a 52-week range of $20.60 to $40.82.
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Wagoner was resolute, saying the board backs him and he hasn’t considered quitting. “I have given no thought to anything but turning the business around,” Wagoner said. “I wasn’t brought up to run and hide when things get tough.”
But the reaction of some analysts suggests the drumbeat will continue. 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 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.
It’s unclear how much help GM can count on from its unions. The United Auto Workers called GM’s plan “devastating” and warned it will make negotiations 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.
To get production in line with demand, GM will cut 30,000 jobs, which represent 17 percent of GM’s North American hourly and salaried work force of 173,000, and close nine assembly, stamping and powertrain plants and three parts facilities.
GM’s U.S. market share fell to 26.2 percent in the first 10 months of this year compared with 33 percent a decade ago, the result of increasing competition from Asian rivals. GM lost almost $4 billion in the first nine months of 2005.
GM isn’t the only U.S. automaker cutting costs. Last week, Ford said 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.
The plants that are closing make a variety of vehicles. GM didn’t target plants where it makes full-size trucks and SUVs, products it’s counting on for a comeback.
Instead, it’s significantly reducing its capacity to produce minivans like the Buick Terraza, midsize SUVs like the GMC Envoy and midsize sedans like the Buick LaCrosse. It’s also ending production at the Lansing, Mich., plant that produces the slow-selling Chevrolet SSR, a small pickup.
GM said assembly plants will close in Oklahoma City; Lansing; Doraville, Ga., and Ontario, Canada. One production line will close and one will remain open in Spring Hill, Tenn. The company is removing shifts at plants in Moraine, Ohio, and 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., and Portland. The Portland facility has 95 workers. One other site will be announced later.
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, 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 any 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, including 30 assembly plants, 23 stamping plants and 24 engine and transmission plants, spokesman Stefan Weinmann said.
Wagoner said the job cuts will come primarily through attrition and early-retirement packages. GM has an annual attrition rate of about 7 percent, he said.
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.