GM CEO Rick Wagoner announces additional reductions in truck and SUV production as well as a 20% reduction in white-collar employment.
U.S. market continues to deteriorate for trucks and SUVs
Despite efforts to respond to the continued downturn in demand for large trucks and SUVs, CEO Rick Wagoner, in a move to increase liquidity, today announced additional actions. According to Wagoner, these actions should help raise $15 billion in additional cash.
To generate $10 billion, GM will reduce sales and marketing budgets as well as production of large trucks and SUV’s. In addition to the white collar job cuts, GM will eliminate health care coverage for U.S. salaried retirees over 65, partially offsetting this with pension increases.
In addition to taking a hard look at the Hummer brand, GM is also looking at its global assets, including European assembly plants, for possible sale or to be used as collateralization for loans.
Plan based on 14 million vehicle sales
According to Wagoner, GM is going to have to “ride out” the poor current market conditions and is basing their current plans on annual car sales of 14 million for 2008 as well as 2009.
The plant closures that were announced in June that will result in the elimination of 150,000 units will be accelerated, meaning that the four affected plants will close sooner than originally announced. Although GM announced another 150,000 unit reduction in truck and SUV production, no plants have been named for closure.
Additional cost savings
GM will also save money by deferring payments into the UAW VEBA trust until 2010, suspending dividends on common stock, freezing white collar salaries and eliminating annual cash bonuses for the executive group. Cutbacks in advertising and marketing will also result in cost savings.
Technology spending
Although GM is cutting costs in a number of areas, spending on alternative propulsion systems (hybrid, electric and hydrogen fuel cell) as well as smaller engines (4 cylinder and turbocharged 4-cylinder) will continue and even increase to help support the increased production of smaller, more fuel-efficient vehicles.
Changes seen as permanent
Even though the U.S. economy (and corresponding world economies) may rebound in the future, GM sees the changes it is making in workforce and plant reductions as permanent – which means a much smaller General Motors will be operating in the 21st century.
Tags: general motors, gm
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