GM Plans to Cut 25,000 U.S. Jobs by 2008

GM has announced that it will eliminate 25,000 jobs in the U.S. over the next three years as part of a massive restructuring program.

GM Plans to Cut 25,000 U.S. Jobs by 2008 (AP)

General Motors Corp. plans to eliminate 25,000 jobs in the United States by 2008 and close plants as part of a strategy to revive North American business at the world’s largest automaker, its chairman said on Tuesday. Speaking to shareholders at GM’s 97th annual shareholder meeting in Delaware, Chairman and Chief Executive Rick Wagoner said the capacity and job cuts should generate annual savings of roughly $2.5 billion. GM now employs about 111,000 hourly workers.

Wagoner revealed the cutbacks as he laid out a four-step strategy to invigorate GM’s North American operations, its biggest and most troubling part. Already this year, GM’s U.S. market share has fallen from 27 percent a year ago to 25.4 percent, much of the loss at the expense of Asian automakers such as Toyota Motor Corp. and Nissan Motor Co. Wagoner focused on four priorities: increasing spending on new cars and trucks; clarifying the role of each of GM’s eight brands; intensifying efforts to reduce costs and improve quality; and continuing to search for ways to reduce skyrocketing health care expenses. He noted that health-care expenses add $1,500 to the cost of each GM vehicle. This puts GM at a “significant disadvantage versus foreign-based competitors,” Wagoner said.

General Motors shares rose 65 cents, or 2.1 percent, to $31.07 in morning trading on the New York Stock Exchange. GM’s shares have tumbled to their lowest price in more than a decade, and Fitch Ratings and Standard and Poor’s Ratings Services both reduced the company’s bond rating to “junk” status last month.

Clearly, GM has to do something about its massive cost structure in order to be competitive in a global market. It’s rather difficult, though, when the governments of a company’s main competitors massively subsidize expenses that have to be borne by the company domestically.

FILED UNDER: Economics and Business, General
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Dave Schuler says:

    Note that we’re the outlier here.

  2. Note that most Toyotas and Hondas sold in the US are built in the US, as are their design centers, and many (not all, granted, but neither are the “domestics'”) suppliers. So that “government subsidy” doesn’t apply.

    Can you make the comments window resizeable, or at least a little bigger? The text box is wider than the window (Firefox 1.0.3, Win2K, 1152×864)

  3. M. Murcek says:

    Hmmm… GM’s in the fix they are right now because of all the knuckling under they did in negotiations with the UAW over the past couple decades. Now it’s UAW members who will be out of jobs.

    Looks like validation of the “feed the beast” strategy to me.