DETROIT – General Motors Corp. Chief Executive Rick Wagoner said the plans outlined Monday to stop production at 12 facilities and cut 30,000 hourly jobs will help GM return to profitability.
But he declined to specify when GM would show a profit.
The cuts were deeper than had been expected and come as questions swirl over whether GM could go bankrupt, Toyota Motor Corp. closes in on the world’s largest automaker and GM’s financial losses in North America approach $5 billion this year.
In addition to the 12 targeted facilities, GM will re-evaluate three packaging operations in the state and cut third shifts of workers at two assembly plants elsewhere. Wagoner said the moves will slash structural expenses by about $7 billion, when combined with other cost cuts.
“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,” said Wagoner, who took direct control of GM’s struggling North American operations in April. “But these actions are necessary for GM to get its costs in line with our major global competitors.”
The cuts are the most extensive since GM announced in 1991 and 1992 that it would stop production at 21 assembly plants and manufacturing operations, and cut 74,000 salaried and hourly jobs by the mid-1990s.
After earning $3.7 billion in 2004, the company lost more than that over the next nine months as its U.S. vehicle sales dropped and health care costs rose.
GM lost a total of $3.8 billion through September. Gains at its GMAC financing unit and some of its global operations couldn’t offset the $4.8 billion GM lost in North America alone.
UAW leaders, already angered by the bankruptcy of automotive parts supplier Delphi Corp. last month, expressed disappointment with Monday’s news.
“It is devastating to the many thousands of workers, their families and their communities,” UAW President Ron Gettelfinger and Vice President Dick Shoemaker said in a statement. It will make the UAW’s negotiations with GM on a new contract in September 2007 “much more difficult,” they added.
In June, workers began anxiously awaiting news on a restructuring after Wagoner warned that GM planned to close some plants and shed 25,000 U.S. hourly jobs and that it was negotiating with the UAW to get workers to pay more for their health care costs.
GM and the UAW announced a landmark health care deal in October that is expected to save the automaker an estimated $1 billion in cash from its $6 billion medical expense.
GM’s plans revealed Monday take those cost cuts a step further.
Most of the 30,000 hourly job cuts will be in the United States, where GM employs 106,000 union workers. The majority of those cuts will be achieved through natural attrition, such as retirement, but GM will also offer some buyouts to help cut jobs, Wagoner said.
Union contracts prevent GM from closing plants outright. GM will stop production at the 12 facilities and negotiate with its unions to close them, Wagoner said.
GM will also trim white-collar and contract jobs through attrition, as it has in past years. Those cuts should total about 7 percent in 2006, Wagoner said. That equals roughly 2,600 workers.
GM’s troubles stem partly from its continued fall in U.S. vehicle sales.
Despite falling sales and Monday’s cuts, Wagoner said GM would not give up its title as the world’s largest automaker to Toyota without a fight.
GM isn’t cutting back its brands or its spending on car and truck development. Rather, Wagoner said Monday that GM will invest $8 billion in developing future cars and trucks, up from $7 billion currently.
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