GM cutting 30,000 jobs and closing a dozen auto plants

http://www.iht.com/articles/2005/11/21/news/gm.php

GM cutting 30,000 jobs and closing auto plants
By Micheline Maynard The New York Times
MONDAY, NOVEMBER 21, 2005

DETROIT General Motors, battling to stem its losses and stave off a charge by its global competitors, said Monday that it would cut 30,000 jobs in North America and close all or part of a dozen facilities over the next three years.

The restructuring is meant to cut $7 billion a year from the No.1 automaker's costs by the end of 2006, $1 billion more than its previous target. That translates to about one-sixth of GM's annual corporate spending of about $42 billion.

"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," Rick Wagoner, GM's chief executive, said. "But these actions are necessary for GM to get its costs in line with our major global competitors."

GM and Ford Motor, the top two U.S. carmakers, have been losing ground in the U.S. market to Toyota and Honda of Japan and other foreign competitors with lower costs and reputations for building more reliable automobiles. GM's U.S. market share has fallen to about 26 percent from more than 50 percent in the early 1960s.

The moves will affect seven assembly plants in the United States and Canada, including some with the highest quality rankings in the industry.

Among them are GM's Saturn plant in Spring Hill, Tennessee, once known for its unique labor-management cooperation, and its car plant in Oshawa, Ontario, another symbol of the company's efforts to improve its efficiency.

But those plants, and the others involved in the GM announcement, cannot escape the company's declining condition. Over the past year, GM has been hit by billion-dollar losses.

The 30,000 job cuts, about 17 percent of its North American work force, include the 25,000 positions GM previously said it planned to eliminate in the United States. GM has about 325,000 employees worldwide. Once the plant closings and cutbacks are complete in 2008, GM will be able to build 4.2 million vehicles in North America, down about one million vehicles from its production capacity now, and two million less than it was able to build in 2002.

GM said it expected the job cuts to take place through retirements and a buyout package that it is negotiating with the United Automobile Workers union. Under terms of its labor agreement, the GM plants technically will not be closed until the two sides can reach a deal during the next set of national contract talks.

UAW leaders denounced the move as "disappointing, unfair and unfortunate."

"We have said consistently that General Motors cannot shrink itself to prosperity," the UAW's president, Ron Gettelfinger, and vice president, Richard Shoemaker, said in a statement. "In fact, shrinking General Motors only exacerbates its problems."

GM said it would shut five automobile assembly plants in Oklahoma City; Lansing, Michigan; Doraville, Georgia; and Oshawa, Ontario. It is eliminating an assembly line at its Saturn plant, and will eliminate the third shift at a plant in Moraine, Ohio, and at another car plant in Oshawa. Along with that, seven parts factories and distribution centers will be closed in Pennsylvania, Michigan, Oregon and Ontario.

The announcement failed to rally investors. GM shares were down 54 cents, or 2.2 percent, to $23.51, in late trading Monday in New York.

In recent weeks, the stock has been flagging amid speculation that GM could be forced to seek Chapter 11 bankruptcy protection. The company's debt is rated junk by Standard & Poor's and Moody's Investors Service.

Last week, Wagoner flatly denied the auto company was considering bankruptcy, a step taken in October by Delphi, GM's biggest parts supplier. Delphi was part of GM until 1999.

The crisis at GM has created pressure for Wagoner, 52, who has run the company the past four years. He said Monday that while has not thought about resigning, the speculation about the company's future has been frustrating.

But, Wagoner said, "It comes with the turf, though."

He declined to provide a financial forecast for 2006, or to predict when GM would reverse a string of losses. He said GM would book a significant charge to account for the cutbacks, but said details would be announced later.

Analysts said that the cuts were a necessary first step to turning GM around, but that they would not be enough if the company did not introduce cars and trucks that stand up well against competitors' products.

"The primary question is, are you going to be able to produce cars and trucks that are compelling enough to sustain or even gain market share," said Brett Hoselton, an analyst at KeyBanc Capital. "Health care and pension costs are important issues but the primary issue is always what does your top line look like."

Ford said Friday that it would cut 4,000 salaried jobs, or about 10 percent of its white-collar work force. It also is expected to close plants under its own restructuring plan, set to be announced early next year.

Both Ford and GM have enormous costs for pension and health care benefits. GM has 2.5 retirees for every active employee.

Recently, UAW members at GM voted to accept modest changes in their health care benefits, which had been virtually free. That agreement is expected to eventually save the company $3 billion in annual expenses before taxes.

Vikas Bajaj contributed reporting from New York.

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