"General Motors to Cut Workers, Salaries, Production, Boost Green Car R&D" Green Car Advisor

General Motors to Cut Workers, Salaries, Production, Boost Green Car R&D

By Scott Doggett, Contributor

General Motors Corp. announced today that it will lay off salaried workers, cut truck production, borrow up to $3 billion and make additional investments in green-car technologies in response to the weak economy, high fuel prices, shifts in consumer vehicle preferences, and the lowest U.S. industry sales volumes in a decade.

GM said the moves will raise $15 billion to help cover losses and turn around its North American operations, including $10 billion from internal cost-cutting and $5 billion from selling some assets and borrowing against others.

"We are responding aggressively to the challenges of today's U.S. auto market," GM Chairman and CEO Rick Wagoner said in a broadcast to employees. "We remain committed to bringing to market great products that target changing consumer preferences for more fuel-efficient vehicles."

Wagoner noted that 11 of GM's 13 most recent major U.S. product launches, and 18 of its next 19 launches, are cars and crossovers, which are key growth areas.

Spending for non-product programs will also be reduced, the company said, but powertrain spending will be increased to support the development of alternative propulsion and fuel economy technologies and small-displacement engines.

GM did not indicate how much money the automaker was looking to spend on that development and calls seeking details were not immediately returned.

GM said it will suspend its $1 per share annual dividend immediately, which will improve liquidity by $800 million through 2009. It's the first time the company has suspended its dividend since 1922.

GM's shares fell today as much as 6 percent to a new 54-year low of $8.81 before rebounding late in the day.

Chief Operating Officer Fritz Henderson said GM wants to reduce its total salaried costs in the U.S. and Canada by more than 20 percent.

A large chunk of the reduction, he said, would come from cutting health care benefits for salaried retirees over age 65. Those people would get a pension increase from the company's over-funded pension fund to help compensate for Medicare and supplemental insurance, the company said.

There will be no annual discretionary cash bonuses for the company's executives this year. They "will have a significant reduction in their cash compensation opportunity for 2008," the company said.

Wagoner's pay rose 64 percent to $15.7 million last year over 2006, despite the fact that GM posted a $39 billion loss in 2007 and its stock price fell by about 19 percent. It's entirely possible that the executives' perception of "a significant reduction" is inconsistent with the perception of everyone else on Earth.

Henderson said the company intends to reduce its truck production capacity by 300,000 vehicles. That's 150,000 more than it announced at its annual meeting last month.

The company will speed up previously announced closures of some truck and sport utility vehicle factories.

GM said last month it would close plants in Janesville, Wisconsin; Oshawa, Ontario, Canada; Toluca, Mexico; and Moraine, Ohio, but Henderson would not say which closures would be accelerated or when they would take place.

The company also will make thousands of job cuts at other truck assembly and parts factories, he said. GM has about 40,000 salaried employees in North America.

In addition to the operating changes and other actions, GM expects to raise an additional $4 billion to $7 billion through asset sales and financing activities.

Outside advisors are currently engaged in evaluating alternatives. A strategic analysis of the Hummer brand is underway, and GM is continuing to focus on profit improvement initiatives across all remaining GM brands.