GM to cut 15,000 jobs !
Discussion
NEW YORK (CNN/Money) - General Motors Corp. is cutting 25,000 jobs and closing an unspecified number of plants over the next 3-1/2 years, CEO Rick Wagoner told shareholders Tuesday, as the world's largest automaker struggles to stem huge losses.
Wagoner, who is also chairman of GM, did not offer more details other than to say the troubled automaker needs to cut capacity by the end of 2008.
The 25,000 jobs represent about 17 percent of GM's U.S. work force, which includes 111,000 unionized employees and another 39,000 salaried staff.
Speaking at GM's annual shareholders meeting in Wilmington, Del., Wagoner said the company's goal is to trim capacity so that plants are running full out. He noted that the cuts announced Tuesday and other moves this year will reduce its production capacity to 5 million cars and trucks by year-end, down from 6 million in 2002.
GM (Research) stock rose about 2 percent following the announcement, giving a lift to the broader market. GM is one of 30 stocks in the Dow Jones industrial average.
GM also announced plans to buy more components from suppliers outside the United States, and reported it couldn't be sure it would win needed health care cost cuts from the United Auto Workers union.
A spokesman for the union wasn't immediately available for comment.
GM's UAW contract essentially forces it to pay union employees during the life of the contract even if hourly workers are laid off and their plants are closed. But those protections only run through September 2007, when the current four-year pact with the union ends.
GM spokesman Edd Snyder said the automaker has yet to reach any agreement with the UAW yet on the nature or the manner of the work force reduction.
GM may be able to handle much of the reduction by offering early retirement incentives, said David Cole, chairman of the Center for Automotive Research, an independent research group, estimating that more than 25,000 of the company's U.S. workers are near retirement age.
Cole said he was surprised that GM was ready to announce cuts of this magnitude at the Tuesday meeting, and suspected that union leadership was willing to go along with any voluntary staff reductions that GM is likely to use through 2007.
"I can't believe he'd make an announcement of that without labor being supportive of it," Cole said. "They (the union) are in a position where they are very vulnerable. Without strong employers, their job protections don't mean anything."
In fact a drop of 25,000 U.S. jobs for GM by the end of 2008 is not much steeper than the normal attrition rate the automaker's seen in recent years.
In January Wagoner told reporters at the North American International Auto Show in Detroit that attrition among hourly workers had been running about 5 percent annually, and about 2 percent for salaried staff.
If the work force kept to last year's attrition rates, there would be a reduction of 7,000 to 8,000 employees this year without any plant closings, and three more years of those kind of gradual trimming could achieve much if not all of the 25,000 reduction in active staff.
"As things currently stand, GM has too many brands, workers, managers, capacity, and bureaucracy," said Peter Morici, a business professor at the University of Maryland and a critic of GM's management who says the cuts announced Tuesday were too little and too late.
"Offered the challenge to rescue GM from the dusk heap of history, occupied by other formerly mighty icons like Bethlehem Steel, AT&T and Packard, Wagoner demonstrated he will not be making any history worth remembering," he said in an e-mail.
In his remarks, Wagoner noted GM is talking to the unions about the health care issue.
"In recent weeks, we have been in intense discussions with the UAW and our other unions focused on a cooperative approach to significantly reduce our health care cost disadvantage," he said. "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."
Wagoner's prepared remarks suggested that there are other options available if the union does not agree to changes, although he added, "I don't believe that it serves a useful purpose to speculate on that."
Weak sales, share price
Cole said the cuts are deeper than he expected at GM, but they solve only part of the major problems the company is facing.
"You've got the revenue side and the cost side," he said. "On the revenue side, you've got to still sell product profitably. But the important thing at this point is to define a trajectory to get them to sustainable profitability."
GM's sales have tumbled 7 percent for the first five months of the year, and the company has also been hurt by what Wagoner has called "fewer high profit SUVs, more lower profit cars."
Its share of the U.S. market has fallen to 25.7 percent from 27.2 for the same period a year ago.
While shares are trading up from the 12-year low they hit in April, they have not recovered from the hit taken in March when GM warned of a steep loss in the first quarter.
GM ended up reporting a loss of $839 million, or $1.48 a share, excluding special items, for the quarter. Despite the plans announced Tuesday, Wagoner's prepared remarks did not include guidance on when the company might turn a profit.
GM's weak stock price prompted veteran financier Kirk Kerkorian to make a tender offer for 5 percent of GM shares outstanding at $31 a share a month ago, on top of the nearly 4 percent he had purchased at a lower price.
That offer, which helped lift GM stock, expires Tuesday. Kerkorian has said he was making the purchase as an investment and, despite a reputation as an activist shareholder, he was not at the shareholders' meeting.
GMAC staying put?
GM's credit ratings were recently cut to junk-bond status by Standard & Poor's and Moody's, the nation's two leading bond-rating agencies, hurting GM's profitable finance unit, GMAC.
Since the credit downgrade, there has been some speculation that GMAC might be spun off to improve its credit rating while freeing up cash for GM. But Wagoner suggested the automaker intended to keep the finance arm.
"GMAC is a business that is very important to GM," he said. "Besides their steady contribution to our overall earnings and financial strength, GMAC provides significant support in the sale of GM's cars and trucks around the world, at both the wholesale and retail level."
"This 'hand-in-glove' working relationship between GM Auto and GMAC provides ample benefits to our dealers and our stockholders, and is critical to our ability to compete in the marketplace," said Wagoner.
But, he added, "We are now in the midst of a detailed study of the strategic options that are available to us."
Wagoner, who is also chairman of GM, did not offer more details other than to say the troubled automaker needs to cut capacity by the end of 2008.
The 25,000 jobs represent about 17 percent of GM's U.S. work force, which includes 111,000 unionized employees and another 39,000 salaried staff.
Speaking at GM's annual shareholders meeting in Wilmington, Del., Wagoner said the company's goal is to trim capacity so that plants are running full out. He noted that the cuts announced Tuesday and other moves this year will reduce its production capacity to 5 million cars and trucks by year-end, down from 6 million in 2002.
GM (Research) stock rose about 2 percent following the announcement, giving a lift to the broader market. GM is one of 30 stocks in the Dow Jones industrial average.
GM also announced plans to buy more components from suppliers outside the United States, and reported it couldn't be sure it would win needed health care cost cuts from the United Auto Workers union.
A spokesman for the union wasn't immediately available for comment.
GM's UAW contract essentially forces it to pay union employees during the life of the contract even if hourly workers are laid off and their plants are closed. But those protections only run through September 2007, when the current four-year pact with the union ends.
GM spokesman Edd Snyder said the automaker has yet to reach any agreement with the UAW yet on the nature or the manner of the work force reduction.
GM may be able to handle much of the reduction by offering early retirement incentives, said David Cole, chairman of the Center for Automotive Research, an independent research group, estimating that more than 25,000 of the company's U.S. workers are near retirement age.
Cole said he was surprised that GM was ready to announce cuts of this magnitude at the Tuesday meeting, and suspected that union leadership was willing to go along with any voluntary staff reductions that GM is likely to use through 2007.
"I can't believe he'd make an announcement of that without labor being supportive of it," Cole said. "They (the union) are in a position where they are very vulnerable. Without strong employers, their job protections don't mean anything."
In fact a drop of 25,000 U.S. jobs for GM by the end of 2008 is not much steeper than the normal attrition rate the automaker's seen in recent years.
In January Wagoner told reporters at the North American International Auto Show in Detroit that attrition among hourly workers had been running about 5 percent annually, and about 2 percent for salaried staff.
If the work force kept to last year's attrition rates, there would be a reduction of 7,000 to 8,000 employees this year without any plant closings, and three more years of those kind of gradual trimming could achieve much if not all of the 25,000 reduction in active staff.
"As things currently stand, GM has too many brands, workers, managers, capacity, and bureaucracy," said Peter Morici, a business professor at the University of Maryland and a critic of GM's management who says the cuts announced Tuesday were too little and too late.
"Offered the challenge to rescue GM from the dusk heap of history, occupied by other formerly mighty icons like Bethlehem Steel, AT&T and Packard, Wagoner demonstrated he will not be making any history worth remembering," he said in an e-mail.
In his remarks, Wagoner noted GM is talking to the unions about the health care issue.
"In recent weeks, we have been in intense discussions with the UAW and our other unions focused on a cooperative approach to significantly reduce our health care cost disadvantage," he said. "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."
Wagoner's prepared remarks suggested that there are other options available if the union does not agree to changes, although he added, "I don't believe that it serves a useful purpose to speculate on that."
Weak sales, share price
Cole said the cuts are deeper than he expected at GM, but they solve only part of the major problems the company is facing.
"You've got the revenue side and the cost side," he said. "On the revenue side, you've got to still sell product profitably. But the important thing at this point is to define a trajectory to get them to sustainable profitability."
GM's sales have tumbled 7 percent for the first five months of the year, and the company has also been hurt by what Wagoner has called "fewer high profit SUVs, more lower profit cars."
Its share of the U.S. market has fallen to 25.7 percent from 27.2 for the same period a year ago.
While shares are trading up from the 12-year low they hit in April, they have not recovered from the hit taken in March when GM warned of a steep loss in the first quarter.
GM ended up reporting a loss of $839 million, or $1.48 a share, excluding special items, for the quarter. Despite the plans announced Tuesday, Wagoner's prepared remarks did not include guidance on when the company might turn a profit.
GM's weak stock price prompted veteran financier Kirk Kerkorian to make a tender offer for 5 percent of GM shares outstanding at $31 a share a month ago, on top of the nearly 4 percent he had purchased at a lower price.
That offer, which helped lift GM stock, expires Tuesday. Kerkorian has said he was making the purchase as an investment and, despite a reputation as an activist shareholder, he was not at the shareholders' meeting.
GMAC staying put?
GM's credit ratings were recently cut to junk-bond status by Standard & Poor's and Moody's, the nation's two leading bond-rating agencies, hurting GM's profitable finance unit, GMAC.
Since the credit downgrade, there has been some speculation that GMAC might be spun off to improve its credit rating while freeing up cash for GM. But Wagoner suggested the automaker intended to keep the finance arm.
"GMAC is a business that is very important to GM," he said. "Besides their steady contribution to our overall earnings and financial strength, GMAC provides significant support in the sale of GM's cars and trucks around the world, at both the wholesale and retail level."
"This 'hand-in-glove' working relationship between GM Auto and GMAC provides ample benefits to our dealers and our stockholders, and is critical to our ability to compete in the marketplace," said Wagoner.
But, he added, "We are now in the midst of a detailed study of the strategic options that are available to us."
I was reading about the state of GM when I was in the US last month. The losses are huge (rather like BL in the 70's). If the Unions get involved, followed by the politicians, (ala BL?) then GM could be in for a real rough time.
It was ironic, having read a report on the dire business state of GM, to read people on corvetteforum taking the piss out of the remnants of our motor industry.....
It was ironic, having read a report on the dire business state of GM, to read people on corvetteforum taking the piss out of the remnants of our motor industry.....
:L81 said:
taking the piss out of the remnants of our motor industry.....
.....we still have a motor industry!
better phone someone to stamp that out a bit sharpish 
Is there anyone in this country still making cars? Apart from the Nissans etc. using the UK as a European entry point, even TVR is now Thames Valley Russia cars
LuS1fer said:Do we know how sales of the Monaro/Pontiac are going in USA? Last I heard it was moving slower than they hoped which I guess would be far from positive for any new Camaro plans. Come to that, I've not seen any figures on how the Monaro/Vauxhall is selling in UK.
...they've changed their minds about making a new Camaro....
GM seem desperate. Just got this e-mail:
GM Employee Discount for Everyone Event
From now until July 5, 2005, enjoy the GM Employee Discount on almost all 2005 GM vehicles across all divisions.* For the first time in history, everyone in America gets the GM Employee Discount.
It's a great price. You pay what we pay. Not a cent more. At participating dealers only.
--------------------------------------------------------------------------------
This event is only available for a limited time. So here's how you can get the GM Employee Discount:
Use the links above to choose a 2005 GM vehicle.
See the GM Employee Discount Price and search inventory online.
Visit your dealer and take delivery of your GM vehicle by July 5, 2005.
--------------------------------------------------------------------------------
*
Excludes 2005 Chevrolet Corvette and medium duty trucks. Take delivery by July 5, 2005
I never saw one GTO on the road in Florida and from what I hear it's not selling well at all. Protest at it being a non-American car? Who knows. The thing is there's an awful lot of Americans who don't actually want a V8 and the GTO only comes in one flavour.
GM Employee Discount for Everyone Event
From now until July 5, 2005, enjoy the GM Employee Discount on almost all 2005 GM vehicles across all divisions.* For the first time in history, everyone in America gets the GM Employee Discount.
It's a great price. You pay what we pay. Not a cent more. At participating dealers only.
--------------------------------------------------------------------------------
This event is only available for a limited time. So here's how you can get the GM Employee Discount:
Use the links above to choose a 2005 GM vehicle.
See the GM Employee Discount Price and search inventory online.
Visit your dealer and take delivery of your GM vehicle by July 5, 2005.
--------------------------------------------------------------------------------
*
Excludes 2005 Chevrolet Corvette and medium duty trucks. Take delivery by July 5, 2005
I never saw one GTO on the road in Florida and from what I hear it's not selling well at all. Protest at it being a non-American car? Who knows. The thing is there's an awful lot of Americans who don't actually want a V8 and the GTO only comes in one flavour.
Gassing Station | Corvettes | Top of Page | What's New | My Stuff