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General Motors said Tuesday it will reduce its white-collar workforce,
suspend its dividend, reduce spending on marketing and make more production
GM is going to speed up previously announced closures of pickup truck plants
in Oshawa, Ont., and three other U.S. and Mexican locations, chief operating
officer Fritz Henderson said.
Rick Wagoner, the automaker's chair and chief executive officer, said the
actions, along with raising new capital and selling assets, will generate
about $15 billion US through the end of 2009.
"We've a big job to do," he told reporters in a briefing broadcast from
The company has been the subject of speculation that it will run out of
money as car markets shrink with higher oil prices. The intent of the
changes is to create a "robust liquidity situation," Wagoner said.
"We can't sit back and wait for U.S. conditions to improve," he said. "We're
trying to protect against the downside."
The actions announced Tuesday will provide the company with liquidity
through the end of 2009, GM said.
Of the total, a forecast $10 billion will come from cuts and reductions, and
somewhere between $4 billion and $7 billion will be from asset sales and new
The cuts will come from:
a.. Reductions in truck capacity: $2.5 billion.
b.. White collar salaries: $1.5 billion, a 20 per cent cut.
c.. Capital spending: $1.5 billion.
d.. Deferred payments: $1.7 billion.
e.. Raised working capital: $2 billion.
GM plans to cut salaried staff, but attrition, buyouts and retirements may
mean there is no need for layoffs, the company said.
Health coverage for U.S. salaried retirees will be eliminated, although
pensions will be increased.There will be no more base salary increases this
year or next, and no cash bonuses for executives. For top executives, the
reduction could be as much as 84 per cent, GM said.
The truck plans will reduce the number of vehicles to be produced by 300,000
by the end of 2009. Half of the 300,000 are new cuts, with the other half
There will also be thousands of job losses at other truck assembly and parts
factories, he said.
The company initially wants to borrow $2 billion to $3 billion, pledging
stock of foreign subsidiaries or its finance arm as security.
GM stock fell 49 cents to $8.89 in New York trading after the company
announced the changes.
1st round of cuts in June
The moves announced Tuesday are the second round of slashing at the
automaker in two months. On June 3, it announced plans to close its Oshawa,
Ont., truck plant, and three others.
The company said then it was shifting away from trucks and sport utility
vehicles to focus on smaller car production in response to shifting consumer
demand. Higher gasoline prices have prompted buyers to shun big vehicles in
favour of more fuel-efficient automobiles.
GM also said at the time that it was reviewing the future of its Hummer
With files from the Associated Press