Wednesday, December 3, 2008

GM to cut 31,500 jobs

Dec 3, 2008

CHICAGO - GENERAL Motors said on Tuesday it will slash its US workforce by nearly a third and shed brands as it urged lawmakers to rescue it from total collapse with 18 billion dollars (S$27.5 billion) in loans.

GM warned that it could run out of cash as soon as January and that its failure would have a 'catastrophic' impact on the US economy as it joined Ford and Chrysler in asking Congress for billions in low-cost government-backed loans.

The Big Three were turned away empty handed last month and told to present plans showing they could achieve 'long-term viability' and repay the loans once the economy stabilizes.

GM submitted a plan to radically slash operating costs, increase the production of fuel-efficient vehicles and offered lawmakers several symbolic concessions including paying its chief executive officer a salary of just one dollar and getting rid of its corporate jets.

The company said it will reduce its US workforce from the current level of 96,537 people to between 65,000 and 75,000 salaried and unionised workers by 2012 and cut the number of US plants to 38 in 2012 from 47 in 2008.

'We believe that taking these tough actions will allow us to weather the current economic crisis and become a profitable, self-sustaining company if we are able to secure immediate financial assistance from the federal government,' GM chairman Rick Wagoner said in a conference call.

Wagoner said GM - and the broader US economy - would 'enter into a very uncertain and dangerous period' if Congress does not approve the loans.

'We hope that our case is compelling this time. We believe it is,' Wagoner said.

GM said it expects to be 'fully competitive' with rival Toyota on US labor costs for 'both current workers and new hires' by 2012 due to 'additional changes to be negotiated' with its main union, productivity improvements, turnover rates and the planned job cuts.

The largest US automaker said it would need 12 billion dollars (S$18.32 billion) to cover operating costs through the end of 2009 - including four billion this month - and also requested a revolving credit line of six billion dollars to 'provide liquidity should a severe market downturn persist'.

GM vowed to repay the 12 billion dollar loan by 2012 should overall US auto sales remain at or above 12 million vehicles a year.

US auto sales plunged to an annualized rate of 10.6 million vehicles in October and 10.2 million in November after averaging 17 million vehicles a year over the past seven years.

GM's plan calls for 'shared sacrifice, including further reduction in the number of executives and total compensation paid to senior leadership', the automaker said.

'The plan also requires further changes in existing labor agreements, including job security provisions, paid time-off, and post-retirement health-care obligations,' GM said.

Common stock dividends will remain suspended during the life of the loans.

The automaker will also 'review' the future of its Saab and Saturn brands as it focuses its product development and marketing efforts in the United States on four core brands - Chevrolet, Cadillac, Buick and GMC.

'As part of the plan, the company also will accelerate discussions with the Saturn retailers, consistent with their unique relationship, to explore alternatives for the Saturn brand,' GM said.

Pontiac will become a 'specialty brand with reduced product offerings', GM said, adding it will 'immediately undertake a global strategic review of the Saab brand' and has already begun exploring the sale of its hulking Hummer brand.

GM said it will cut the number of vehicle types it offers in the United States to 40 in 2012 from 51 in 2000 and also will slash its dealer network to 4,700 in 2012 from 8,138 in 2000.

GM currently sells 48 different vehicles at 6,450 dealers in the United States. -- AFP

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