Advertisement

GM Closures to Hit 12 Plants, 30,000 Jobs

Times Staff Writers

General Motors Corp., reeling from slumping sales, crushing costs and massive losses, said Monday that it planned to close all or part of a dozen facilities in the U.S. and Canada and eliminate 30,000 manufacturing jobs over the next three years.

The cutbacks are even more extensive than GM officials had predicted five months ago when they warned that the company would reduce 25,000 jobs in a restructuring of its North American division -- which has lost more than $4 billion so far this year.

For the record:
12:00 AM, Nov. 23, 2005 For The Record
Los Angeles Times Wednesday November 23, 2005 Home Edition Main News Part A Page 2 National Desk 0 inches; 23 words Type of Material: Correction
General Motors -- A map in Tuesday’s Section A that accompanied an article about General Motors Corp. plant closures mislabeled Illinois as Missouri.

Chief Executive Rick Wagoner told Wall Street analysts that “we expect we will achieve much of this [workforce] reduction by attrition and early retirement programs” rather than layoffs.

The restructuring would be GM’s largest since 1991, when the automaker -- facing many of the same problems -- slashed 74,000 jobs and closed 21 North American facilities.

Advertisement

GM said the shuttered operations would help the company save $7 billion in annual costs by the end of next year.

The cuts also would lower GM’s North American production capacity to about 4.2 million vehicles a year, down 30% from 2002.

But some Wall Street analysts disputed whether GM could achieve the savings it forecast, and others noted that the automaker remained saddled with several major problems, including a declining market share in the United States.

After the announcement, GM’s already battered stock fell 47 cents to $23.58. Last Wednesday, the stock -- a component of the Dow Jones industrial average -- fell as low as $20.90 a share, its lowest level in 18 years. The stock has dropped 41% so far this year.

Advertisement

GM’s shares have retreated even though Los Angeles billionaire Kirk Kerkorian, through his Tracinda Corp., amassed a 9.9% stake in GM this year and indicated his firm might seek a seat on GM’s board of directors.

There has been speculation that Kerkorian, whose GM investment now appears to be in the red, might push for other actions to boost the automaker’s share price. But he has been publicly silent about his intentions, and his office didn’t return a call seeking comment Monday.

GM, whose nameplates include Chevrolet, Buick, Saturn, Hummer and Pontiac, said it would close assembly plants in Oklahoma City, Lansing, Mich., and Doraville, Ga., along with one of its plants in Oshawa, Canada. GM also is closing one of two assembly lines at its Spring Hill, Tenn., plant, which makes Saturn vehicles, and eliminating shifts at its Moraine, Ohio, assembly plant, and at a second assembly plant in Oshawa.

Other closures and production cuts affected powertrain, stamping and other types of facilities in Michigan, Pennsylvania, Oregon, Missouri and Canada.

The latest round of cuts represents 18.5% of the 162,000 workers employed in the United States and Canada by the world’s largest automaker, which has about 325,000 employees worldwide.

Along with archrival Ford Motor Co., GM has been losing U.S. market share for years to Toyota Motor Corp. and other Asian and European companies, many of which can make cars more cheaply and offer vehicles with designs and features that increasingly appeal to American buyers, analysts said.

GM also bet heavily on large, gas-guzzling sport utility vehicles, which lost favor with consumers after gasoline prices soared above $3 a gallon this summer in response to Hurricane Katrina.

The vehicles were a key source of profit in recent years for the company, whose share of the U.S. market dropped from more than 45% in the mid-1980s to 26.4% through the first 10 months of this year.

Advertisement

GM now utilizes only about 85% of its production capacity in North America, a situation that drains resources as the company maintains and staffs unnecessary facilities, analysts said.

“You don’t start making profit [on production] until you are in the 90%-capacity territory,” said Bruce Belzowski, a researcher at the University of Michigan’s Transportation Research Institute.

“I see GM making itself smaller, not globally, but in the U.S., with a smaller production footprint here,” he said.

That will be evident with the planned closure of GM’s Oklahoma City plant, which makes SUVs.

“They may build fewer of them, but they will be shifting the production to other plants with underused capacity, so they’ll end up better utilizing their workers and their remaining facilities,” said George Peterson, president of AutoPacific Inc., a consulting firm in Tustin.

The restructuring delivers another blow to the United Auto Workers union, which just last month agreed to let GM reduce its cash outlay for current and retired workers’ healthcare by $1 billion a year.

UAW leaders blasted the latest cutbacks as “disappointing, unfair and unfortunate” and said the company’s “continuing decline in market share is not the fault of workers or our communities.”

“We have said consistently that General Motors cannot shrink itself to prosperity,” UAW President Ron Gettelfinger and Vice President Richard Shoemaker said in a statement. The automaker needs to offer vehicles “that consumers find attractive, exciting and want to buy.”

Advertisement

But many analysts said management and labor were both to blame for GM’s decline.

Years of lucrative labor contracts have left the automaker saddled with enormous wage, healthcare and pension costs for about 1.1 million salaried and hourly U.S. workers, retirees and their dependents. The burden adds about $1,500 to the cost of every GM vehicle made in North America, reducing GM’s competitiveness with lower-cost rivals.

“This debacle is a joint venture of both the UAW and the GM management,” which has left “wages too high and work rules too cumbersome,” said Peter Morici, a business professor at the University of Maryland.

“If the UAW doesn’t change its tune, General Motors will end up” in Chapter 11 bankruptcy reorganization, he said.

There already has been speculation of a potential GM bankruptcy in recent weeks, particularly after the nation’s biggest auto-parts supplier, Delphi Corp., filed for Chapter 11 last month.

Delphi is a former GM subsidiary, and there is concern that GM could be forced to cover billions of dollars of Delphi pension and retiree healthcare costs.

GM also has seen its bond ratings fall to “junk” status, which makes it more difficult and expensive for the automaker to borrow.

But Wagoner told employees Thursday that the automaker, which sells vehicles in 200 countries, had no intention of filing for Chapter 11.

Wagoner said GM was getting a good response to several new vehicles, including the Chevrolet Cobalt, Pontiac Solstice and Hummer H3.

To further boost sales, “we’re going to continue to move aggressively on the revitalization of brands, particularly Saturn,” and boost production of “crossover” vehicles -- which are styled like SUVs but built on car-like platforms -- that are surging in popularity, Wagoner told the analysts.

GM noted that its plan for an early retirement program to help cut its payroll would require an agreement with the UAW, which GM said it hoped to reach soon.


Advertisement