General Motors Corp. said it will eliminate 30,000 jobs and close all or part of 12 facilities as the automaker confronts the biggest threat to its survival since the onslaught of Japanese rivals led to a vast overhaul in the early 1990s.
GM has made strides since then, improving vehicle quality and making plants more flexible and efficient. But GM's rivals have stepped up, too, placing the No. 1 automaker in the painful position of shrinking again and possibly losing its spot as the world's largest automaker to Toyota Motor Corp.
As part of the latest overhaul, GM will reduce its annual North American manufacturing capacity to 4.2 million vehicles by 2008, down from 6 million vehicles in 2002, a 30 percent reduction.
Yesterday's announcement adds 5,000 job cuts to the 25,000 the company promised in June, lowering GM's workforce to about 100,000 by the time the reductions are completed in 2008. Plants singled out for closing or reduction build a wide range of vehicles, including sport-utility vehicles, minivans and passenger cars with a rich GM legacy, such as the Chevrolet Impala and Monte Carlo. The cuts come as the stock tumbles and the company's strategy has been criticized.
GM has dominated the U.S. auto market for much of the industry's history. Thirty years ago, GM accounted for half of all the vehicles sold in the United States; the company's market share now stands at 26 percent. Its colossal power prompted the Department of Justice to consider breaking up the company into several pieces in the 1960s.
GM chief executive G. Richard Wagoner Jr. said the job cuts and plant closings are part of a larger strategy to bring the size of GM's manufacturing operations in line with the reality of the company's U.S. market position. During a news conference in Detroit yesterday, Wagoner acknowledged that GM is in a "difficult period" and that his plan faced opposition from the United Auto Workers union, though some labor experts expect eventual union agreement.
"I think this is tough medicine for everybody involved with our company," Wagoner said. "I don't want to make this sound like an easy call for us or for them, but this is our call. We are responsible for running this part of the business."
Already, GM's troubles are being blamed for threatening to unravel the American industrial dream of a comfortable, middle-class standard of living for factory workers. In the auto industry, after years of struggles, the union workers' package includes a $28-per-hour salary, top-tier health care, vested retirement pensions and other enviable benefits.
In a statement yesterday, the United Auto Workers union called GM's announcement "extremely disappointing," going on to say that for thousands of workers, the future is unclear and "hope is diminished."
Labor experts and industry analysts say GM is having as much impact on U.S. business and society in its decline as it did during its ascendancy in earlier decades.
Phyllis Borzi, a health and labor professor at George Washington University, said GM's slide is exposing the need for a federal industrial policy.
Borzi said industries such autos, airlines and steel have been stuck with the albatross of legacy costs -- chiefly, large pension obligations and health care costs for retirees -- while today's economy prizes high technology, globalization and outsourcing. She said it is the federal government's responsibility to assist the industries.
"Other countries help industries to modernize and get into a position to compete, and we don't," she said. "The people who really bear the burden are the employees and former employees."
Last week in Washington, members of Michigan's congressional delegation -- including Rep. John D. Dingell, the ranking Democrat on the House Energy and Commerce Committee -- and Michigan Gov. Jennifer M. Granholm began to look for ways to pressure the Bush administration to act on auto issues. William Clay Ford Jr., Ford Motor Co.'s chairman and chief executive, is visiting Washington today to speak on energy issues. Ford has called on the White House to convene a summit on energy issues and problems in the auto industry.
GM's No. 1 U.S. market position has come under attack from increasingly competitive automakers from Europe and Korea as well as a rejuvenated Chrysler, which is now owned by Germany's DaimlerChrysler AG.
Sales in the United States have continued to surge for the largest Japanese automakers, which include Toyota, Honda Motor Co. and Nissan Motor Co. In recent years, the Japanese have consistently beaten GM, Ford and Chrysler to the market in growing vehicle segments, such as soft-riding, car-like SUVs and gas-electric hybrids.
The year has been gloomy for GM and its workers. So far, GM has reported North American losses exceeding $4 billion. GM's debt has undergone a series of downgrades by ratings agencies that fear GM might default. GM's largest supplier, Delphi Corp., filed for bankruptcy protection last month and is engaged in high-stakes negotiations with UAW and other unions.
The possibility of a strike and speculation of GM bankruptcy have sent shudders though the investment community.
In Detroit, the mood is grim. A small-business owner in Detroit complained on Friday that the city is starting to feel like Flint, Mich. -- the GM factory town that was devastated in the 1980s and 1990s by GM plant closures. The plight of the Michigan town was the subject of the 1989 Michael Moore documentary "Roger and Me," which cornered then-chief executive Roger Smith seeking answers.
Among the closures announced yesterday by Wagoner is part of the Saturn plant in Spring Hill, Tenn., where the Saturn Ion is assembled. Additionally, GM is fully or partially closing plants in Moraine, Ohio, and Doraville, Ga., where SUVs and minivans are assembled. A mid-size car plant in Oshawa, Ontario, also is getting the ax.
Vehicles that will see production cutbacks include versions of the Chevrolet TrailBlazer and the GMC Envoy. The closures could lead to the eventual demise of the GM minivans, including the Chevrolet Uplander, Buick Terraza and Saturn Relay.
GM is shuttering a plant that builds metal body parts; an engine factory in Flint; and a powertrain parts plant in St. Catherines, Ontario.
Wagoner said workers at the plants were notified this morning. In its statement, the UAW promised to do everything in its power to protect its workers from the cutbacks. "We have said consistently that General Motors cannot shrink itself to prosperity. In fact, shrinking General Motors only exacerbates its problems," the union said.
Workers at the General Motors plants in Oshawa, Ontario, leave work after learning of the company's restructuring plans.