G.M. to Cut 30,000 Jobs and Close 12 Facilities in 3 Years

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. 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. 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.

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.

November 21, 2005
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.

Micheline Maynard reported from Detroit. Vikas Bajaj reported from New York.
Copyright 2005 The New York Times Company
http://www.nytimes.com/2005/11/21/business/21cnd-gm.html