General Motors Tightens Its Belt

By TERRIL YUE JONES

Dec. 13, 2000 12 AM PT

TIMES STAFF WRITER

DETROIT —

General Motors Corp. on Tuesday unveiled its most significant reforms in years, saying it will eliminate 6,600 white-collar jobs in North America and Europe, close a factory in Britain and take a restructuring charge of $1.5 billion to $2.5 billion in the fourth quarter.

The world’s largest auto maker also confirmed that it will phase out the 103-year-old Oldsmobile brand because of slumping sales and lack of distinct identity among GM’s eight American brands.

GM’s moves are the latest bad news out of Detroit and come as sales of new autos are beginning to slow after two years of a scorching pace. Ford Motor Co. and the U.S. group of DaimlerChrysler have also warned of lower profit, and all three auto makers have said they will cut production to reduce inventories of unsold vehicles.

Declining sales and increased price pressure in Europe, as well as losses at Japanese affiliate Isuzu Motors Ltd., are forcing GM to revise its fourth-quarter earnings to $550 million to $600 million, or $1.10 to $1.20 a share, down from analyst projections of $1.70 a share. Overall profit for the year is expected to be $4.9 billion to $5 billion, Chief Executive Rick Wagoner said, compared with $4.56 billion in 1999.

The measures announced by Wagoner include closing an engine plant in Lansing, Mich., and eliminating 900 additional jobs there through attrition or relocating workers to other GM locations. About 2,000 factory jobs will be lost through the plant closure in Luton, Britain, which is intended to help return GM Europe to profitability.

GM chose the right time to announce the cutbacks, at the beginning of a downturn rather than wait until it’s in a crisis, said Jeff Schuster, senior manager for North American forecasting at J.D. Power & Associates.

“It’s an attempt to batten down the hatches and say, ‘We need to be more globally competitive,’ ” he said. “It’s a move in the right direction to create a company that can withstand a downturn in our market now and in Europe in the future.”

GM shares gained 19 cents Tuesday to close at $51.75 on the New York Stock Exchange; the stock has declined 29% year to date.

As reported in The Times on Tuesday, GM will ax the Oldsmobile division despite having poured hundreds of millions of dollars into trying to revitalize the brand and make it appeal to younger buyers.

“Obviously, this is a very difficult and painful decision,” Wagoner said. “We stretched to find profitable ways to further strengthen the Oldsmobile product line, including developing products with our global alliance partners. But in the current environment, there was no workable solution.”

Despite trying strenuously to make the brand attractive to younger consumers, GM was unable to take the “Old” out of Oldsmobile. Unit sales for the first 11 months of the year were 265,878, an 18.5% drop from 1999. Sales volume has plummeted from a high of more than 1 million in 1985, when the Olds Cutlass was one of the best-selling cars in the country.

GM North America President Ron Zarrella promised to help Oldsmobile customers as well as the 2,800 dealers make the transition.

“I assure you we will be sensitive to all dealer concerns,” Zarrella said, pledging to continue building and selling Oldsmobile products through their life cycles unless demand drops off. That includes the completely redesigned Oldsmobile Bravada sport-utility vehicle, which goes on sale next month.

All Oldsmobiles have sister models elsewhere in GM, so discontinuing their production doesn’t mean the end of a certain type of vehicle. The compact Alero, for instance, is the Olds version of the Pontiac Grand Am; the mid-size Intrigue is similar to the Pontiac Grand Prix and Buick Regal; the Bravada is the sister of the Chevrolet TrailBlazer and GMC Envoy.

Most Olds dealerships are twinned with at least one other GM brand, and only 63 dealerships sell only Oldsmobiles, Zarrella said.

GM is putting into place transition teams to develop plans of action for each Olds dealer.

“This is a very sad day,” said Harold B. Wells, chairman of the National Automobile Dealers Assn. and an Olds dealer for 45 years.

“We must remember that there are a whole lot of very good people--dealers, employees, their families and customers alike--who have remained loyal to this GM brand for many, many years,” he said in a statement. “A decision like this is crushing to them. GM needs to move quickly to take into account the millions of dollars that dealers have invested in facilities, equipment, personnel and training. They deserve nothing less than fair compensation.”

Zarrella said GM’s Saturn subsidiary will fill the gap left by Oldsmobile, with an expanded product lineup to appeal to younger buyers who might otherwise be what the industry calls “import intenders.”

Oldsmobile was founded by Ransom E. Olds in 1897 and acquired in 1908 by Billy Durant, who combined it with Buick to form the beginning of General Motors.

For years Oldsmobile, like GM’s other divisions, operated virtually as a separate company, with its own factories, engines and assembly plants. In recent years GM has integrated its divisions under the company umbrella, downgrading their chiefs from corporate vice presidents to general managers, and turning them into essentially marketing divisions.

Gary Phillips, a freight supervisor in Cypress and a seven-year Oldsmobile owner, said he is sorry to hear of the brand’s demise.

“I’m kind of sad to see it go. I like mine a lot,” said Phillips, 45, who owns a 1993 Olds Achieva. “I leased it for four years, then went ahead and bought it. I like everything about it.”

He has put it up for sale, though, because he wants to buy the Buick he is currently leasing.

“Now because of what happened today,” he said, “I’m definitely going to have to drop the price.”

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Maybe It Was Your Father’s Oldsmobile

GM officials confirmed Tuesday that they will discontinue the Oldsmobile brand. Here is a look at some of its key models, and its slumping recent sales:

1902

The curved dash Oldsmobile Runabout is a hit, and Olds becomes the largest auto maker

in the United States.

1940

The millionth Olds since 1933 rolls off the assembly line in Lansing, Mich.

1949

The Series 76 Futuramic is a smaller version of the Series 98.

1966

The Toronado is the first front-wheel-drive American car since the Cord of the 1930s.

1960-present

Sales rise, then fall precipitously.

1997