WDET News
- GM Announces Restructuring Plan
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Jul 16, 2008Automotive & Business
Chevy Volt Concept CarGeneral Motors is downshifting again. Just a month ago the struggling automaker announced it would shut four assembly plants…and cut production. The company said Tuesday it will cut thousands of white collar jobs and eliminate health care benefits for some retirees. The company hopes to buy itself some breathing room by cutting costs and selling some overseas assets. Detroit Public Radio’s Jerome Vaughn has more.
SOQ
General Motors Chairman and CEO Rick Wagoner reassured company workers this morning that the automaker was about to undergo yet another round of restructuring – but that there was no reason to panic.
“What we’re trying to do here is have a plan which reacts to what is obviously an adverse U-S market condition…and is very much focused on liquidity and cash flow to ensure that we have the resources we need to get through a tough period.”
Wagoner says the company plans to save $10 billion through cost cutting efforts. Actions to achieve that goal include further cuts in truck production. GM announced just a few weeks ago that it will close four truck assembly plants and boost car production in the coming months.
The Detroit automaker will also look to reduce its salaried workforce costs by 20 percent. The company currently has about 40,000 salaried workers. Wagoner says he hopes early retirement offers allow GM to hit its target without layoffs.
And GM will eliminate health care benefits for its salaried retirees over age 65 – although the automaker says it will offset that loss with some additional pension payments for the retirees.
Tawfik Khalil worked for GM for close to 30 years – before retiring in 2005. He analyzed possible defects on GM vehicles during legal battles. Khalil says he’s not too worried about the retiree health care changes for himself since he has Medicare. He’s more worried about the financial health of the company.
“I did work for them for a considerable amount of time – and it is distressing to me what is happening to GM and as well as the rest of the US automotive industry.”
The other major tenet of GM’s restructuring announced today is a plan to sell off some assets. The automaker says that will bring in another five billion dollars. CEO Rick Wagoner says it’s all part of a short-term effort to weather the current economic storm.
“This is the kind of stuff we need to do to make sure we can get through the tough period in the U-S and hopefully break through to brighter days.”
But “tough” may be an understatement. GM’s stock price has hit 50 year lows in recent days – and rumors of a possible bankruptcy have floated through financial markets.
Wagoner said last week that bankruptcy isn’t a concern…but that hasn’t stopped the rumors. GM’s U-S sales fell 16 percent in the first half of this year…compared to the same period in 2007. Auto analyst Michael Robinet says there’s still plenty of work ahead for the automaker.
“They’ve been faced with a market that has changed substantially in an extremely short period of time – and virtually no vehicle manufacturer is able to modify their line-up to meet those types of conditions…but GM is doing what it can to restructure for a more profitable future.”
General Motors is expected to release its second quarter earnings reports later this month.