From: Alejandro Valle Baeza (valle@SERVIDOR.UNAM.MX)
Date: Tue Jun 07 2005 - 20:46:34 EDT
Do you remember GM bonds downgrading? Here next step..
GM Plans to Cut 25,000 U.S. Jobs by 2008
Tuesday June 7, 8:23 pm ET
By John Porretto, AP Auto Writer
The United Auto Workers union responded that GM's ability to make the cuts will depend on worker attrition rates and its contract negotiations with the union. GM's UAW contract expires in 2007.
"The UAW is not convinced that GM can simply shrink its way out of its current problems. What's needed is an intense focus on rebuilding GM's U.S. market share, and the way to get there is by offering the right product mix of vehicles with world-class design and quality," said UAW Vice President Richard Shoemaker, who directs negotiations with GM.
Wagoner revealed the cutbacks as he laid out a strategy to invigorate GM's North American operations, its biggest and most troubled, amid lackluster sales of its highly profitable trucks and sport utility vehicles, which have been hurt by high fuel prices.
GM posted a $1.1 billion loss in the first quarter and its U.S. market share has fallen to 25.4 percent from 27 percent a year ago, as customers increasingly are choosing models from Toyota Motor Corp., Nissan Motor Co. and other Asian automakers.
The cuts would be on top of earlier reductions that pared GM's U.S. workforce from 177,000 hourly and salaried employees at the end of 2000 to 150,000 at the end of last year, according to figures provided by GM.
"Let me say up front that our absolute top priority is to get our largest business unit back to profitability as soon as possible," said Wagoner, who added that with $20 billion in cash and short-term investments, GM is in no danger of going out of business anytime soon.
"But if we don't fundamentally get at these structural issues -- whether it's gee-whiz, exciting products, or the right distribution, or a solid cost structure in every element of business -- the risk of continually being weakened over time is real," he said.
Wagoner wouldn't say which plants are in danger of being closed, but David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said the most likely targets are several older plants. Those include facilities in Janesville, Wis.; Doraville, Ga.; Oklahoma City and Pontiac, Mich., he said. The Janesville plant was built in 1919 and the Doraville plant was built in 1947. The other two plants were built in the 1970s.
Cole said GM probably won't close plants that have recently undergone costly renovations, such as the plant in Lordstown, Ohio, that recently got $1 billion worth of upgrades.
Disgruntled shareholders, who saw the value of their shares fall to a 10-year low in April, gave Wagoner an earful on Tuesday.
"This company is sick," said James Dollinger, a Buick salesman from Flint, Mich., who angrily told Wagoner he should resign.
Fellow shareholder John Lauve compared the GM leadership to officers aboard the Titanic as it headed for an iceberg. "The Titanic sank because the directors ignored the warnings," said Lauve, who criticized everything from gas gauges in GM vehicles to the company's health-care cards. "We need to excel at the basics."
Fending off such criticism, Wagoner outlined 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, echoing comments made by the Standard and Poor's and Fitch ratings services after both reduced the company's bond rating to "junk" status last month.
Wagoner described as intense the status of ongoing negotiations with the United Auto Workers and other unions on ways 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," said Wagoner, the CEO since 2000 and chairman since 2003.
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. Messages left Tuesday with the UAW were not returned.
Wagoner said another part of the company's strategy is to make GM's eight brands more distinct from each other. Chevrolet and Cadillac will continue to have full vehicle lineups, he said, but the company's other six brands -- GMC, Pontiac, Buick, Saturn, Saab and Hummer -- will be more tightly focused on niche markets.
"In some cases, such as Pontiac and Buick, it will mean fewer but stronger entries in the future," Wagoner said.
Wagoner said the company also plans to put less emphasis on incentives and focus more effort on selling GM vehicles in top markets like New York, Miami and Los Angeles.
General Motors shares rose 31 cents, or 1 percent, to close at $30.73 on the New York Stock Exchange.
That is near the $31 a share offer made by billionaire investor Kirk Kerkorian for 28 million GM shares. Kerkorian's offer expired Tuesday; a spokeswoman for Kerkorian's investment firm, Tracinda Corp., said the results would be announced Wednesday.
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 vehicles in 2002 to 5 million by the end of this year.
According to the Harbour Report, an annual productivity survey released last week, GM's 30 North American plants operated at an average of 85 percent of their capacity in 2004, compared to an average of 107 percent for Toyota's six North American plants.
GM already shut a factory in Linden, N.J., in April and a factory in Baltimore in May, affecting about 2,000 employees.
AP Auto Writer Dee-Ann Durbin in Detroit and Delaware correspondent Randall Chase contributed to this report.
On the Net,
General Motors Corp.: http://www.gm.com
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