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GM to cut 25,000 jobs by '08

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.
Uhh oh... has anyone given thought to what will happen to Solstice delivery if there is a strike?
 

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I told my girlfriend the other day that I expect there to be a strike at GM within 5 years.

That was way before reading this.

The reason: I think GM's talking so much about how they can't afford the health care anymore as sort of a precursor to negotiate changes in the healthcare with the unions. Probably to make it so workers are paying for part of their dues. Naturally the Union won't want to take that cut, so they'll strike.

Now I think there's more evidence of just that happening. But now I think they're gonna tell the unions they have to cut the healthcare or cut the jobs (possibly both) but I'd guess it'll be a bargaining chip.


I'm no expert, that's just my personal speculation. =)
 

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I'd guess they'll cut jobs first and then go after those left with that hammer that we'll all be gone if you don't chip in for healthcare now.
 

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I'd be surprised if they get things worked out by Sept 2007. GM is going to want a ton of concessions, and I am not sure the union will give into all of them without a fight. First because it is not easy for a union to give in on all fronts. They have to get something somewhere to give something, and I do not see where GM is offering much by announcing huge layoffs, plant closings, and demanding a renegotiation of health care costs.

Second, the union already feels like they are being blamed for mismanagement. GM keeps throwing around how bad off they are because of health care costs. Then they turn around and hand over $2 billion in cash to Fiat to back out of a disasterous business deal they never should have negotiated in the first place (it was to gain access to diesel engines for Europe. At that price, they would have been better off to design and build their own).

As far as the UAW is concerned, GM lost it's shirt on a bad business deal with Fiat, and now wants the rank a file to make up the difference. On top of that, Wagoner has not even offered to accept concessions on himself, as Bill Ford did (He refused a salary until the company was back in black) or Ghosn did at Nissan (promised to quit in x number of years if he didn't turn Nissan around).

So far, the 2007 contract looks very ugly, and to me it appears to have all the makings of a strike.

Order your Solstices early!
 

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Discussion Starter #5
It'll go like this

GM "Drop the healthcare or the 25,000 people will not be offered an early retirement package and we will do away with paying them when they are not working"

Union "okay"

Gm "Good, now bend over and let daddy play"

The union is between a rock and a hard place here. They can strike, and probably will, but GM has actual things to bargin with as well as reason behind their demands, where the Union just has greed.
 

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Discussion Starter #6
Fformula88 said:
Second, the union already feels like they are being blamed for mismanagement. GM keeps throwing around how bad off they are because of health care costs. Then they turn around and hand over $2 billion in cash to Fiat to back out of a disasterous business deal they never should have negotiated in the first place (it was to gain access to diesel engines for Europe. At that price, they would have been better off to design and build their own).
A company as big as GM should have the cash to make a bad deal or 2. But they don't, because of the union. The Fiat deal could have turned out to be a winner. I applaud GM for cutting their losses and moving on. They should not have to hurt for years because of it.
 

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I just read somewhere that the 25,000 over 3 years isn't much more than normal 5 percent annual retirement or attrition rate at GM.
 

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SlipSlider said:
A company as big as GM should have the cash to make a bad deal or 2. But they don't, because of the union. The Fiat deal could have turned out to be a winner. I applaud GM for cutting their losses and moving on. They should not have to hurt for years because of it.
Cutting their loses on this probably was a good thing to do. However, I wouldn't blame the union for it. GM spends $2 billion in cash, and almost immediately after claims they can no longer compete because of their union contract, which they signed and agreed to in the first place.

Blaming the union because of $5 billion in health care costs, after handing out a buyout to a different comapny to the tune of $2 billion just looks bad. Then telling the union that they want immediate concessions to a contract they previously agreed to also looks bad.
 

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Hey, let's move the manufacturing plants to India. This could cut $2000 off the price of every car! Who needs auto manufacturing in the USA anyway. We are just bunch of money rich consumers of goods, and don't need to produce unimportant items like cars and trucks. :leaving:

GM and Ford both are in serious trouble in the world auto market. Bad times are just starting for American automakers. This storm is growing worst, and will continue too before it gets better. Ever wonder why American autos have the worst warranties amoung autos sold in the US?
 

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Analysts seem to be poo-poo-ing GM's cuts...

Forbes:
http://www.forbes.com/2005/06/07/cx_dl_0607gm.html?partner=autos_newsletter

Autos
GM Cost-Cutting: Just Eyewash?
Dan Lienert, 06.07.05, 1:06 PM ET

General Motors plans to reduce its U.S. labor force by 25,000 or more by 2008 and cut assembly capacity, saving some $2.5 billion a year, the company's chairman, Rick Wagoner, told its annual stockholders' meeting.

On the surface, this sounds like a major corporate restructuring by a company intent on digging itself out from a heap of trouble. But in fact it may be just eyewash.

The employment reduction may not involve the sort of deep and dramatic layoffs one might expect from such a struggling company. A spokeswoman for GM (nyse: GM - news - people ) confided that natural attrition--deaths, retirements and resignations--would provide for "much of the 25,000" target. Indeed, Wall Street expects a 5% annual natural-attrition rate at GM--equivalent to Wagoner's numbers.

"This has not really saved the day for them in the past," said Rod Lache, managing director at Deutsche Bank (nyse: DB - news - people ). Losing 25,000 employees would not be "an extraordinary accomplishment over the next four years. It would be consistent with what they've done in the past four years. A lot of that gets offset with wage inflation."

Wagoner discussed GM's plans to close several assembly and component plants over the next few years, but this would not necessarily result in savings on wages, as GM's contract with the United Auto Workers still requires it to pay employees displaced by plant closures.

Wagoner's cost-cutting plan seems to have some holes in it, which is bad news for shareholders, who saw their company lose $1.3 billion in the first quarter. GM has enormous nonautomotive expenses such as pensions and health care liabilities (the company spends $1,500 per car on employee health care), its market share is declining and its sales mix, according to Wagoner, has been "much weaker" recently. He spoke today of selling "fewer high-profit SUVs, more lower-profit cars."

New GM cars such as the Chevrolet Cobalt and Pontiac G6 are just OK compared with their Japanese competitors. The company is betting its midterm financial well-being not on these kinds of passenger cars but on the overhaul of its full-size truck and SUV architecture.

GM's new generation of large SUVs will go on sale next year, but the market for such vehicles could be caught in an unrecoverable tailspin. American automakers have seen sales of many high-volume mid- and full-size SUVs plummeting 20% to 30% this year.

So how is GM going to get its costs and revenues in line?

"Today, Rick Wagoner failed," wrote professor Peter Morici of the University of Maryland's Robert H. Smith School of Business, in an e-mail. "He needed to explain to shareholders what percent of the market GM can hold and then map out how he will win it. He needed to explain how GM will cut nonmanufacturing costs such as product development costs and management overhead. He did none of those things."

Added Morici, "The capacity cuts are too little too late, and the rest is really nothing new."
 

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G.M. announced today 25,000 layoff!

With G.M. losing on average $2,300.00 on the sale of their average vehicle, How long will it be before they close a Factory near you.? 25,000 G.M. workers slated to unemployement, China producing most of our goods. Our genius President closing Government bases, that protect America, And provide good jobs, and a decent economy in the area around them. The price of heating oil and gasoline devasting the middle class and the poor! What the hell is going on? Did America elect another HOOVER!. Boy I hope all you Bush supporters accept the next depression. We are on the brink. I hope I am wrong, But this Dictator cares more about buying friends overseas, Then taking care of the Average American. Pityfull just Pityfull. Mitch :cool:
 

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MITCH said:
With G.M. losing on average $2,300.00 on the sale of their average vehicle, How long will it be before they close a Factory near you.? 25,000 G.M. workers slated to unemployement, China producing most of our goods. Our genius President closing Government bases, that protect America, And provide good jobs, and a decent economy in the area around them. The price of heating oil and gasoline devasting the middle class and the poor! What the hell is going on? Did America elect another HOOVER!. Boy I hope all you Bush supporters accept the next depression. We are on the brink. I hope I am wrong, But this Dictator cares more about buying friends overseas, Then taking care of the Average American. Pityfull just Pityfull. Mitch :cool:
When I saw this thread I thought it wont be long before someone blames the president and sure enough someone thinks the president runs GM. You claim to be republican but you sure are not conserative. It is a pitty that you think we have no control over anything, that it is all Bush. I guess all the bad management decisions made by GM has no part to play in their problems! You want to blame Bush for jobs going overseas but Clinton signed NAFTA and GAT. Many jobs are forced overseas because of high taxes and liberal over regulation of bussiness. Companys go overseas to escape the over regulation. I don't mean to offend any of the hard working union folks but many jobs are lost because companys cannot affored to pay the demands of the unions. The UAW has helped to harm many companys and jobs. A GM employee laid off draws over 90 % of his wage and the health care cost are much higher than with most companys. Money is paid to the union for every car built, which does nothing but force the price of American cars higher. Supplier campanys have to keep cutting their costs to along with their workers wages and benifits because the big three tries to save money this way as opposed to dealing with their own workers. I live near a GM plant and know what those people get they brag about it all the time. I have worked for suppliers in the past and know first had how we had to take cuts to keep GM business. Now for once you may have to take a hit like most private sector workers and all you do is cry and blame the president. I am sorry for your misfortune but you will just have to adapt and change with the rest of us when we have been in your shoes in the past. I would like to encourage you by saying that you will survive and life will go on. I was out of work for over 17 months with two small children and it was very hard but we got past it, and you will too. Your life in not in the hands of Bush but in your own.

Many of my comments are based on you comments in other threads as well as this one but the general them of all you say is the same.
 

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One other thing I might add about Mitch's comment about heating oil being so high is that if you folks up there would allow natural gas to be used the price would be lower. My aunt lives in Maine and so I know first had that everytime a natural gas company has wanted to move in the liberal tree huggers start crying about the danger until they get their way. We use natural gas and it is very safe and clean. When you dont allow competition you pay higher prices that is not Bush's fault. One thing that would bring down gas prices is to have more refineries but the environmentalists have been successful at keeping them out. This country cannot keep up with the demand for oil for the increased population without more refineries and Bush wants to add more but the liberals will fight it and blame Bush for the higher prices.
 
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