November 21, 2005

G.M. to Cut 30,000 Jobs and Close Some Factories

DETROIT, Nov. 21 - General Motors, battling to stem its losses and stave off global competitors, said today that it would cut up to 30,000 jobs and close all or part of 12 facilities over the next three years.

The moves will affect seven assembly plants in the United States and Canada, including some with the highest-quality rankings in the industry.

Among them are G.M.'s Saturn plant in Spring Hill, Tenn., once known for its unusual labor-management cooperation, and its car plant in Oshawa, Ontario, another symbol of the company's efforts to improve its efficiency.

But those plants, and the others involved in the G.M. announcement today, cannot escape the company's declining financial condition. Over the last year, G.M. has been hit by billion-dollar losses, and its market share has slid to near-record lows.

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. That translates to about a sixth of G.M.'s annual corporate spending of $42 billion a year.

Rick Wagoner, G.M.'s embattled chief executive, announced the cuts at the company's headquarters here. The 30,000 job cuts include 25,000 that G.M. had previously announced plans to eliminate in the United States. G.M. has about 173,000 employees in North America, and about 325,000 worldwide.

Once the plant closings and cutbacks are complete in 2008, G.M. will have the capacity to build 4.2 million vehicles in North America, down about 1 million vehicles from its current capacity, and 2 million less than in 2002.

"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," Mr. Wagoner said. "But these actions are necessary for G.M. to get its costs in line with our major global competitors."

G.M. said it would shut five automobile assembly plants in Oklahoma City; Lansing, Mich.; Doraville, Ga.; and Oshawa, Ontario. It is eliminating an assembly line at its Saturn plant, and will eliminate the third shift at a plant in Moraine, Ohio, and at another car plant in Oshawa.

Along with that, seven parts factories and distribution centers will be closed in Pennsylvania, Michigan, Oregon and Ontario.

G.M. said it expected the job cuts to take place through retirements and a buyout package that it was negotiating with the United Auto Workers union. Under terms of its labor agreement, the G.M. plants technically will not be closed until the two sides can reach a deal during the next set of national contract talks.

Today, U.A.W. leaders denounced the move as "disappointing, unfair and unfortunate."

"We have said consistently that General Motors cannot shrink itself to prosperity," Ron Gettelfinger, the president of the union, and Richard Shoemaker, the vice president, said in a statement. "In fact, shrinking General Motors only exacerbates its problems."

Investors reacted only tepidly to G.M.'s news. Its stock was trading down 64 cents, to $23.41, on the New York Stock Exchange this afternoon.

In recent weeks, speculation has circulated among analysts 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.

The crisis at G.M. has created pressure for Mr. Wagoner, 52, who has run the company for four years. Today, he said he had not thought about resigning, although the speculation about the company's future had been frustrating.

But, Mr. Wagoner said, "It comes with the turf."

He declined to provide a financial forecast for 2006, or to predict when G.M. would reverse a string of losses. He said G.M. would book a significant charge to account for the cutbacks, but said details would be announced later.

Analysts said the cuts were a necessary first step to turning G.M. around, but that the cuts would not be enough if the company did not introduce appealing cars and trucks that stood up well against competitors' products.

"The primary question is, are you going to be able to produce cars and trucks that are compelling enough to sustain or even gain market share?" said Brett D. Hoselton, an analyst at KeyBanc Capital Markets. "Health care and pension costs are important issues but the primary issue is always, what does your top line look like?"

G.M. - and to a somewhat smaller extent the Ford Motor Company - has struggled to remain profitable as it loses domestic market share to Toyota, Honda and other foreign automakers, which have lower costs and a reputation of building more reliable automobiles.

On Friday, Ford said it would cut 4,000 salaried jobs, or about 10 percent of its white-collar work force. It is also expected to close plants under its own restructuring plan, set to be announced early next year.

Both Ford and G.M. are suffering from enormous costs for pension and health care benefits, especially at G.M., which has 2.5 retirees for every active employer.

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.

Micheline Maynard reported from Detroit for this article, and Vikas Bajaj from New York.


 
 
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