GM to cut 25,000 jobs by '08
Uhh oh... has anyone given thought to what will happen to Solstice delivery if there is a strike?GM to cut 25,000 jobs by '08
CEO says automaker plans unspecified number of plant closings.
June 7, 2005: 10:33 AM EDT
NEW YORK (CNN/Money) - General Motors Corp. is cutting 25,000 jobs and closing an unspecified number of plants over the next 3-1/2 years, CEO Rick Wagoner told shareholders Tuesday, as the world's largest automaker struggles to stem huge losses.
Wagoner, who is also chairman of GM, did not offer more details other than to say the troubled automaker needs to cut capacity by the end of 2008. The 25,000 jobs represent about 17 percent of GM's U.S. work force, which includes 111,000 unionized employees and another 39,000 salaried staff.
He said the company's goal is to trim U.S. capacity so that the company is running its plants full out.
Shares of GM (Research) rose nearly 2 percent following the announcement, giving a lift to the broader market. GM is one of 30 stocks in the Dow Jones industrial average.
GM also announced plans to buy more components from suppliers outside the United States, and reported it couldn't be sure it would win needed health care cost cuts from the United Auto Workers union.
A spokesman for the union wasn't immediately available for comment.
GM's UAW contract essentially forces it to pay union employees during the life of the contract even if hourly workers are laid off and their plants are closed. But those protections only run through September 2007, when the current four-year pact with the union ends.
GM spokesman Edd Snyder said the automaker has yet to reach any agreement with the UAW yet on the nature or the manner of the work force reduction.
GM may be able to handle much of the reduction by offering early retirement incentives, said David Cole, chairman of the Center for Automotive Research, an independent research group, estimating that more than 25,000 of the company's U.S. workers are near retirement age.
Wagoner said GM is committed to trying to win union approval for health care cost cuts under the current labor contract but added that he couldn't promise shareholders he'd be successful.
"In recent weeks, we have been in intense discussions with the UAW and our other unions focused on a cooperative approach to significantly reduce our health care cost disadvantage," he said. "All parties are working hard on it, in the spirit of addressing a huge risk to our collective futures while providing greater security and good benefits for our employees."
Wagoner said that, for now, GM is committed to trying to cut health care costs in cooperation with the union. His prepared remarks did suggest that there are other options available if the union does not agree to changes, although he added, "I don't believe that it serves a useful purpose to speculate on that."
GM's credit ratings were recently cut to junk-bond status by Standard & Poor's and Moody's, two leading bond-rating agencies.