Plunging Sales Prompt GM to Slash Its Costs : Autos: The giant firm will offer early retirement incentives, limit new hiring and reduce advertising spending.
General Motors Corp., which is racing to slash costs faster than it loses sales, said Friday that it will reduce hiring, delay product plans and induce salaried workers either to resign or retire early.
The latest spending cuts come amid a slumping domestic car market and intensified competition.
The program has no target or deadline, spokesman Terry Sullivan said. It is separate from GM’s “Action Plan” of 1987 that aims to slash up to $13 billion in costs by the end of this year.
“Because of the increasing competitive nature of the automotive industry, we are intensifying our cost-reduction activities throughout General Motors,” he said.
GM, the world’s largest auto maker, is struggling to avoid a debacle as it loses sales at a dangerously fast clip. For three months running, GM has posted its lowest car-market share in nearly 60 years.
GM’s slide in the domestic car market has been accelerating over the past 10 years. For the first six years of the 1980s, its market share slid five percentage points to 41% from 46%. But it took only another three years to plunge another six points, to 35%, in 1989.
The new cost cutting is another sign of concern about the industry conditions. Car and truck sales have been slumping since October, when the 1990 model year began, and officials believe that the downturn will last through the first half of the year.
“I think it’s a classic reaction to structural change in the industry,” said auto analyst John Kirnan of Kidder, Peabody & Co. in New York, referring to recent moves to trim costs and concentrate on car and truck making.
GM, along with its Big Three cousins Ford Motor Co. and Chrysler Corp., on Thursday announced temporary plant closings for later this month and into February that will idle 58,600 employees for at least a week.
The shutdowns resulted from swelling inventories of new cars and slow sales.
No. 3 Chrysler Corp. is trying to trim at least $1 billion from its $26-billion annual budget by the end of 1990. Ford Motor Co. has no formal cost-cutting program, but spokesman Tom Foote said the auto maker is examining expenses and eliminating redundancies and excess.
GM already has cut more than $11 billion under its cost-reduction plan, Sullivan said.
Under the new plan, some employees younger than 53 will be offered bonuses to quit between March 1 and June 30. Older workers will be offered early retirement packages between April 1 and Sept. 30, spokeswoman Patricia Malloy said.
Hiring will be limited to about 500 recent college graduates in technical fields during the first half of the year, she said. In 1989, GM hired about 1,700 college graduates and a smaller number of other workers, Malloy said.
“Right now, it looks as if our recruiting on college campuses this year will definitely be more limited than it was last year,” she said.
