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.
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.