GM Reveals Plan to Save $15 Billion
Wednesday, July 16, 2008
General Motors will try to cut expenses by $15 billion by the end of next year through a combination of job reductions, production slowdowns, terminated retiree benefits and salary freezes, the company said yesterday.
The moves, about six weeks after the struggling auto giant announced plant closings designed to save $1 billion per year, are meant to ensure that GM has enough cash to stay in business.
In an interview, chief executive G. Richard Wagoner shot down speculation that GM would spin off its healthy international division or consider a merger to alleviate its cash crisis.
The Detroit manufacturer maintains its status as the world's largest automaker, largely because of Toyota's surprise June downturn. GM is doing better overseas than domestically -- Buick is a hot brand in China -- but it said yesterday that it anticipates a "significant" second-quarter loss.
The troubles have been exacerbated by soaring gas prices, which have crushed sales of GM's high-profit trucks and sport-utility vehicles. The cost-cutting measures rolled out yesterday include:
· Continued reduction of white-collar staff. Wagoner would not specify how many jobs would be lost through attrition, voluntary buyouts or layoffs, but said, "We suspect the vast majority of reductions will be from initiatives that do not require involuntary actions."
· Cutting health-care benefits to white-collar retirees who are eligible for Medicare and increasing pension payments to partially cover the higher expenses. GM said it has about 73,000 such white-collar retirees on company rolls. Not all will be affected by the new cut.
The rest of Detroit will probably follow suit, analysts speculated. While the benefits represent a relatively minor part of GM's cost-cutting strategy, said John Wolkonowicz, senior auto analyst with Global Insight, cutting them could have symbolic meaning. GM may seek similar cuts for union retirees when the next contract is negotiated, in 2010, he said.
· Selling unspecified vehicle lines, probably starting with the gas-gulping Hummer, which was effectively put on the block at the annual meeting in June. GM has received "quite a lot of interest" for Hummer, Chief Financial Officer Ray G. Young said yesterday. He also tried to dampen speculation that the company might unload any other vehicle lines.