GM Cutting 30k jobs, closing 9 plants

[Lyion]

http://www.nytimes.com/2005/11/21/busin ... r=homepage

G.M. to Cut 30,000 Jobs and Close 12 Facilities in 3 Years
By MICHELINE MAYNARD
and VIKAS BAJAJ

DETROIT, Nov. 21 - General Motors said it would cut up to 30,000 jobs and close a dozen automobile and parts factories and distribution centers in the next three years in an effort to stem the company's billion-dollar losses.

Rick Wagoner, G.M.'s embattled chief executive, announced the cuts this morning at the company's headquarters here before trading began on Wall Street. The company will offer early retirement packages to employee at the plants that will be closed, he said.

All together, the restructuring would reduce the company's costs by $7 billion a year by the end of 2006, $1 billion more than its previous target. The company's production capacity will be cut by 1 million cars and trucks, which comes on top of a reduction of 1 million automobiles from 2002 to 2005. After the latest round of cuts, the nation's biggest automaker will have the capacity to produce 4.2 million cars and trucks, down about 30 percent from 2002.

Shares of G.M. were up 25 cents, or 1 percent, to $24.30 on the New York Stock Exchange in morning trading.

"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," he told employees in a televised address. "But these actions are necessary for G.M. to get its costs in line with our major global competitors."

G.M. has been working on the restructuring plan for the past several months. In recent weeks, speculation has circulated among investors that G.M. could be forced to seek Chapter 11 bankruptcy, sending G.M.'s stock to new lows for the year.

Last week, Mr. Wagoner flatly denied the auto company was considering the step, which was taken in October by the Delphi Corporation, G.M.'s biggest parts supplier. Delphi was part of G.M. until 1999.

Mr. Wagoner had vowed to announce a plan to bring G.M.'s production capacity in line with its United States sales by 2008. The automaker has been meeting with officials of the United Auto Workers union to discuss its plan. Mr. Wagoner said today that he expects to reach a deal with the union soon on reducing jobs through attrition and early retirement packages.

The 30,000 job cuts, which make up almost 10 percent of the company's global staff, appear to include the 25,000 positions it previously announced plans to eliminate in the United States. In an press conference, Mr. Wagoner said he has not thought about resigning. He declined to provide a financial forecast for 2006 but said the company would reduce its non-union, salaried workforce in 2006.

G.M. said it will shut down five automobile assembly plants in Oklahoma City; Lansing, Mich.; Spring Hill, Tenn.; Doraville, Ga.; and Oshawa, Ontario. Seven parts factories and distribution centers will be closed in Pennsylvania, Michigan, Oregon and Ontario.

G.M., and to a somewhat smaller extent Ford Motor Company, has struggled to remain profitable as it loses domestic market share to Toyota Motor Corporation, Honda and other foreign automakers, which have lower costs and have a reputation of building more reliable automobiles. Weak sales of sports utility vehicles and the high cost of employee and retiree benefits are also hurting G.M., which pays for the health care of one million Americans.

Recently, U.A.W. members at G.M. 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. Despite that, G.M. still faces huge liabilities for retiree health care and pension benefits.

[Eziekial]

'bout time. I want to hear how the unions get to explain how every one of them will keep their jobs though and dues will not be cut.

[Tuggan]

about time? 30,000 people are losing their job and all youve got to say is 'about time'?

[Eziekial]

You realize the company has lost 3 billion dollars and is considering selling off the finance division (the only profitable part of GM) just to keep the rest of it's company from slipping further into the abyss? The simple truth is that this company currently does not make money in it's current business model and unless it makes these changes it would have had to file bankruptcy and you would see a lot more than 30,000 people losing their jobs. You see what Delta just did? NorthWest? How many people lost their job when WorldCom went under? I am sorry for the short barb that I posted, it just upsets me that drastic measures need to be taken because parties involved wait too long to act in fear of upseting the other side.

[Lyion]

I think the exasperation you hear, and I feel is that 30k people are about to be fired, and you said 'about time'. It's about time we learn that pure unadultered greed and competition will destroy us.

Yes, the company had a model that was not cut throat and nasty from a bygone era, but what a Merry Christmas to learn you are unemployed because your company cannot compete with foreign entities that do not have to offer health care, retirement or other incentives. That seems a bit wrong to me.

[Tacks]

Maybe GM will decide to not produce pure shit for the market now.

[Tikker]

I think the exasperation you hear, and I feel is that 30k people are about to be fired, and you said 'about time'. It's about time we learn that pure unadultered greed and competition will destroy us.

Yes, the company had a model that was not cut throat and nasty from a bygone era, but what a Merry Christmas to learn you are unemployed because your company cannot compete with foreign entities that do not have to offer health care, retirement or other incentives. That seems a bit wrong to me.

so, are you right wing or left wing?


seems to me a real republican would be all for big business doing what it takes to please their investors and make a buck

[Lyion]

I'm not a Repubiican or a far right winger at all. I'd like to think I'm a moderate, except I have views that swing both far right and far left.

I'm a foreign hawk and a social liberal. I'm against the death penalty, against NAFTA, and pro worker, and always will be. I've posted my philosophy pretty often. My biggest issues over the last 5 years have all been outsourcing, medical coverage, and taxes and they fall on both sides of the isle.

I guess it's simple enough to say I'm Pro American. I'm pretty sure over the last few years Tuggan and I have pretty much been identical in our belief of supporting the American worker, even if other issues we are polar opposites.

[Phlegm]

It is kind of interesting to see the American car companies laying off people and closing plants while many foreign car companies are hiring and opening in plants in the US.

[Eziekial]

Many of those do not offer the medical, retirement and financial benifits the US car makers do.

[Phlegm]

Many of those do not offer the medical, retirement and financial benifits the US car makers do.

They do offer benefits to their employees but not to the level of GM. I dont think they are unionized.

[Captain Insano]

Maybe GM will decide to not produce pure shit for the market now.

yep. Their cars and trucks fucking blow all around. I'd buy japanese over their dogshit any day of the week.

[Minrott]

You mean the ridiculously obcene benefits that the unions have sucked out of GM like wood ticks? Or no normal benefits like everyone else gets? I sincerely doubt there are any automotive factories in the US, foreign owned or not, that don't have medical and 401k.

Place the blame for the loss of these 30k jobs where it belongs. Not on competition, but on the unions.

Also, I wonder how many people who worked in the front offices of those factories lost their jobs.

[Tikker]

you can't solely blame the unions for GM producing shitty vehicles for the last 2-3 decades

[Minrott]

I don't think GM produces shitty vehicles. I think they produce too many variants of the same vehicle, have too many companies producing the same vehicle with a different front clip, and greedy unions have sucked them dry with ridiculous pension plans and lifetime healthcare.

[Captain Insano]

I think they produce shitty, dated looking, overpriced crap mobiles... I would rather own a mazda or nissan any day of the week.

[Ouchyfish]

Mazda sucks the balls of life...Toyota ftw

[Captain Insano]

ROFL "balls of life" 4tw.

[Phlegm]

By Roland Jones
Business editor
MSNBC
Updated: 6:40 p.m. ET Nov. 21, 2005


News of massive jobs cuts at General Motors Corp. may temporarily remove the cloud of bankruptcy hovering over the world’s largest automaker, but stormy weather still lies ahead for the auto icon, analysts say.

GM said Monday it plans to cut 30,000 workers, or about 9 percent of its global work force of about 325,000 people. The job cuts — 5,000 more than expected — are part of an effort to slash $7 billion of expenses by next year, which includes closing nine North American assembly plants and three service and parts facilities.

A spate of downsizing would seem to be just the ticket for GM, now struggling to cope with a slump in demand for gas-guzzling SUVs — its longtime cash cow — and the crippling costs associated with its workers’ massive healthcare bills and pensions, while at the same time warding off competition from nimbler and more efficient foreign car manufacturers like Toyota.

But GM still has a long road ahead to profitability, auto industry analysts say.

In October, GM struck a deal with unions that should cut its annual healthcare costs by $3 billion. But its pension plan, the biggest in U.S. industry, remains in crisis. And the company faces tough negotiations with its unions to reduce its costs, keep them under control and must convince Wall Street it can entice car consumers with a new and exciting product line Global Insight’s automotive industry analyst Rebecca Lindland told CNBC.

“And all these areas have to be maxed out,” she said.

2005 has been a rough road for GM. The car maker has lost almost $4 billion this year alone, shocked investors with earnings restatements and seen its stock price tumble to 18-year lows. GM’s massive staff cuts did little to brighten the outlook for the company or its stock price Monday. Shares of GM were down 1.95 percent at $23.58 by the close of trading on the New York Stock Exchange.

Monday’s layoff plan also did little to impress industry analysts like Efraim Levy, automotive industry analyst at Standard & Poor’s. While Levy believes the company has enough cash to keep it from filing for bankruptcy any time soon, he thinks serious challenges lie ahead for GM, most particularly its negotiations with its labor unions.

“This [announcement] is not enough,” Levy told CNBC, noting that the company will face challenges when it comes to removing employees who are employed under union agreements from its payrolls.

“There has been some progress with healthcare costs, but GM has to negotiate these job cuts with the unions and they have their work cut out for them,” Levy said in a CNBC interview. “They can’t just close down plants without union agreements.”

GM said Monday the job cuts will come primarily through attrition and early-retirement packages to mitigate the impact on workers. Some workers who don’t choose to retire could go into jobs banks, which pay laid-off workers their salary and benefits. GM’s Chairman and Chief Executive Rick Wagoner said details about layoffs and early-retirement packages still need to be worked out with the United Auto Workers (UAW) and other unions.

More union woe could come in the form of a strike at Delphi, GM’s top parts maker, which filed for bankruptcy last month. If the UAW’s negotiations with Delphi break down and workers strike it could force GM to quickly burn through its $19 billion in cash and make a bankruptcy filing far more likely analysts say.

Last week, GM’s Wagoner rejected claims that the company may be heading for bankruptcy. On Monday, the UAW, which is in talks with GM about labor concessions, said GM’s 30,000 layoffs were “extremely disappointing, unfair and unfortunate” and said they would make negotiations more difficult.

Critics of GM say the company has operated more like a bank than an automaker by offering low-cost financing loans to sell its cars. The company has offered a constant series of incentive programs since the Sept. 11, 2001, terrorist attacks. Its most recent discount plan, announced last week, allows anyone in the United States to buy vehicles at the same price employees of GM’s auto suppliers pay.

Using its discount programs, GM has effectively bolstered sales by offering low-cost financing in much the same way that banks have spurred home buying with low-interest mortgages, but sales have slowed since the Federal Reserve began raising interest rates last year, making it more expensive to borrow.

Now Wall Street wants the company to drive up revenue with a new and bold line of products.

“They have to figure out a way to sell cars. To be successful they have to have a product that sells without incentives,” said Andrew Harding, chief investment officer at Allegiant Asset Management, where he helps run $15 billion worth of fixed-income assets such as bonds issued by the automaker’s finance unit, General Motors Acceptance.

GM’s job cuts will shake consumer confidence across the United States and ripple through the auto parts industry, but the impact on the economy as a whole will be slight according to economists. The job cut plan is the largest single U.S. layoff announcement in nearly three years — and just more bad news for consumers already weighed down by high energy prices.

“Everyone understands the old adage that ‘What’s good for GM is good for the U.S. economy,’ and if GM, the bellwether, is struggling, it very clearly affects confidence,” said Michael Gregory, senior economist at BMO Nesbitt Burns. “From a manufacturing standpoint, it’s going to have ripple effects into the parts industry as well — adding to the headwind on the manufacturing side,” he added.

Further down the road, bigger problems may be lurking for GM and the broader automotive business.

Over the next decade, automotive manufacturers are likely to find it hard to find good workers, as they are hit hard by a looming shortage of skilled labor in the U.S. manufacturing industry according to research conducted by Advanced Technology Services, a manufacturing services company, and AC Nielsen, a consulting and custom market research firm.

The big problem for Detroit is an aging workforce. The average age of an automotive worker is 55, and so as the Baby Boom generation nears the traditional retirement age of 60 and these experienced workers retire, automakers and suppliers are going to be left with an inexperienced and less proficient workforce. Fewer apprenticeship programs and fewer high school graduates pursuing manufacturing skills are likely to exacerbate the problem.

“There was a time when Detroit families would pass down their manufacturing job to a relative, but all that has really stopped because there has been so much instability and uncertainty in the business,” said Jeff Owens, president of Advanced Technology Services. “Young people no longer want to pursue a career in manufacturing.”

ATS surveyed some 100 automotive industry executives for its survey, asking then about their views on the coming skilled worker shortage, which the U.S. Bureau of Labor Statistics says will reach 5.3 million people by 2010, increasing to 14 million by 2015. The decline in skilled workers, which is projected to hit in the next five to 10 years, is expected to cost manufacturers an average of $50 million each.

Most auto executives who participated in the survey said most of their costs would come from having to train and recruit new skilled workers, while missed production, paid overtime and lost customer satisfaction are also expected to crimp company profits. Seventy percent of the executives polled said they would be prepared to outsource an entire department or job to avoid doing it in-house.