Detroit (WWJ) -- General Motors Corp. plans to lay off salaried workers, cut truck production, suspend its dividend and borrow $2 billion to $3 billion as it adjusts to a declining U.S. market.
GM said Tuesday the moves will raise $15 billion to help turn around its North American operations. GM Chairman and CEO Rick Wagoner announced the cuts to employees Tuesday. Listen:
Wagoner says the cuts are necessary to adjust to lower U.S. sales and a rapid change in consumer preference to smaller cars.
"We are responding aggressively to the challenges of today's U.S. auto market," said Wagoner. "We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix. We remain committed to bringing to market great products that target changing consumer preferences for more fuel-efficient vehicles."
GM forecasts total U.S. sales of 14.7 million vehicles this year. That's down from 17 million three years ago.
WWJ's Marie Osborne spoke live with Wall Street Journal Detroit Bureau Chief Neil Beaudette, who said GM should considering following in the footsteps of Ford, selling off some of its many brands. Listen:
Here are other plans outlined to workers:
GM plans further salaried headcount reductions in the U.S. and Canada this year. Those cuts will be made through normal attrition, early retirements, mutual separation programs and other separation tools.
Health care coverage for U.S. salaried retirees over 65 will be eliminated, effective January 1, 2009. Affected retirees and surviving spouses will receive a pension increase from GM's over funded U.S. salaried plan to help offset costs of Medicare and supplemental coverage. For more information on Medicare call 1 (800) 803-7174 or click here.
There will be no new base compensation increases for U.S. and Canadian salaried employees for the remainder of 2008 and 2009.
There will be no annual discretionary cash bonuses for the company's executive group in 2008.
GM's executive group will have a significant reduction in their cash compensation opportunity for 2008. For the company's top executive officers, it represents a reduction in their cash compensation opportunity of 75 to 84 percent. The benefit changes, salaried headcount reductions and other related savings will result in an estimated reduction in cash costs of more than 20 percent, or $1.5 billion in 2009.
Additional structural cost reductions of approximately $2.5 billion are expected in GM North America. The reductions will be partially achieved through more adjustments in truck capacity and related component, stamping and powertrain capacity in response to lower U.S. industry volume. Truck capacity is expected to be reduced by 300,000 units by the end of 2009.
GM will reduce and consolidate sales and marketing budgets, with a focus on protecting launch products and brand advertising. Engineering spending in 2008 and 2009 will be held at 2006-2007 levels. These operating actions, combined with the benefits of the 2007 GM-UAW labor agreement, are targeted to reduce North American structural cost from $33.2 billion in 2007 to approximately $26-27 billion in 2010, a reduction of $6-7 billion.
Outside GM headquarters Tuesday, some workers told WWJ's Florence Walton that they understand the company's position, "It's a very competitive business, and it is all hinged upon how the public reacts to our upcoming product line, " said one. "And of course gas prices as well." Another GM employee, with 39-year seniority, said that a buyout may be in his future.
Head of the Canadian Auto Workers union, Buzz Hargrove spoke to WWJ following Wagoner's announcement, "So far they're saying there's no impact on Canada, but I quite frankly don't believe that," Hargrove said.
"Remember, this is the same General Motors that told us they were going to keep the plant open and reinvest in it, and have a new product in there in a couple years time. So, it's pretty hard to believe you're going to have that many trucks taken out and not have some impact directly on the truck plant," he said.
Tune in to WWJ Newsradio 950 on Tuesday, July 15 at 7 p.m. for a special broadcast covering GM's restructuring plan, hosted by AutoBeat Reporter, Jeff Gilbert.
Stay tuned to WWJ Newsradio 950 or click back for the latest developments.
GM Restructuring 07/15
General Motors Chair Rick Wagoner briefing workers on a major new restructuring plan that's expected to include several thousand jobs cuts--and a further slashing of truck production.
GM's Turnaround - 7/15
A local expert on business turnarounds during tough times spoke on WWJ.
General Motors - 7/15
GM's moves today were discussed with the Wall Street Journal's Detroit Bureau Chief on WWJ.
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