GM chief is likely to detail more cuts
General Motors Corp. is expected to cut several thousand salaried jobs and further slash truck production in response to falling U.S. sales, high gasoline prices and Wall Street’s demands for more action to stem its losses, people familiar with the plan said.
GM Chairman Rick Wagoner was scheduled to discuss the changes at a news conference this morning at the company’s Detroit headquarters. GM, battling a 16% decline in U.S. sales this year, released no further details.
The job reductions may involve early retirement incentives, said the people, who didn’t want to be identified because employees haven’t been briefed. Wagoner also is expected to address the automaker’s liquidity position, the people said.
The moves will be GM’s second in six weeks in response to gasoline prices that have soared 39% since February, contributing to the weakest U.S. auto market in more than a decade.
On June 3, Wagoner said GM would close four truck plants by 2010 to eliminate 700,000 units of North American production capacity while boosting output of fuel-efficient small cars.
GM executives also have taken pay cuts during past lean times. Wagoner, Vice Chairman Bob Lutz and others voluntarily reduced their salaries in 2006.
Wagoner was expected to announce this morning that the company would further cut factory capacity at pickup and sport utility vehicle assembly plants, although no specific plant closures were expected to be announced, one of the people briefed on the plan said.
GM also intends to make cuts at factories that supply truck plants, such as those that make engines, transmissions and parts, that person said.
GM also will detail plans to raise more cash to fund its restructuring. Along with the expense cuts, the plans probably will include asset sales, but GM is not expected to borrow with assets as collateral, the people said. The people requested anonymity because the funding was not yet public.
On July 2, a Merrill Lynch & Co. analyst said that GM might need to raise $15 billion and that bankruptcy was “not impossible” should the U.S. market continue to weaken.
The latest changes come amid pressure from Wall Street for GM to cut some of its eight brands, but it wasn’t clear whether GM would make such an announcement today.
The company has said it is exploring the sale of its Hummer brand, known for its hulking SUVs, but GM’s vice president of North American sales, Mark LaNeve, told dealers in a letter last week that no other brands are under such a review.
Besides closing four truck and SUV plants and boosting production of the smaller, more fuel-efficient cars, GM also said six weeks ago that it would produce a new car that could get 45 miles per gallon and would go on sale in 2010.
But for an impatient Wall Street, those changes weren’t enough, and the company’s shares have hit a series of 50-year lows since July 2.
GM shares fell 54 cents, or 5.4%, to $9.38 on Monday. They regained 18 cents in extended trading after GM said it was taking actions “to align the business to current market conditions.”
Through June, sales of pickups, SUVs and vans -- the vehicles most affected by rising gasoline prices -- are down 21% from last year’s first half. GM had relied on light trucks for about 60% of its U.S. volume.
Sales for GM vehicles overseas have continued to gain as North American volume tumbled. GM said Monday that demand in its Latin America-Africa-Middle East region rose 18% in the second quarter. Last week, GM said its European sales through June advanced 2.8% to a record and China volume rose 13%.
