CUT!

GM's big shakeup
Automaker ups job cuts to 30,000 jobs as it shuts plants, facilities in plan to save $7B a year.
November 21, 2005: 10:42 AM EST

NEW YORK (CNNMoney.com) - General Motors Corp. said Monday it would cut 30,000 jobs and close or scale back operations at about a dozen U.S. plants in a bid to save $7 billion a year and halt huge losses in its core North American auto operations.

The cuts, equal to 27 percent of the company's hourly work force, are 5,000 more than the 25,000 jobs GM had said it would cut in June. Many of the cuts would start next year, GM said Monday, despite job protection provisions in its union contract that runs through September 2007.

The automaker said the plan is aimed at saving $7 billion a year by the end of 2006.

GM Chairman Rick Wagoner said the cuts were what the troubled automaker needed to turn around its operations but he wasn't ready to predict when GM will return to profitability. He also wouldn't promise this would be the end of job cuts and plant closings.

"As we sit here today, it's our best guess and well thought out analysis," Wagoner said.. "If we've learned anything in the last five years, it's that there's no guarantees in this business or any other business."

He said he had received support from the company's board of directors and from its employees as he moved forward with the cutback plans and that he had no plans to leave the company. Some investors and analysts have lost confidence in Wagoner given the company's spate of troubles this year. (Full story).

"I've given no thought to anything but turning the business around," Wagoner told reporters, adding that he believes his experience with GM should help him lead that effort. "I wasn't brought up to run and hide when things get tough. I'm convinced that's the way that things get righted."

He said the moves were not due to any pressure by the board. "We're not taking these actions because of any pressure on me," he said. "We're taking these measures to get the business right."

Stock rallies, but ...
Some investors liked the move, and GM (up $0.12 to $24.17, Research) stock rose about 1 percent in morning trading, though the stock is still down about 45 percent this year.

But at least one industry analyst was not impressed.

"The plan is essentially as expected, meaning not terribly aggressive," UBS analyst Rob Hinchliffe wrote in a note to clients, adding that the company's market share, which has been sliding, may fall further. He kept a sell rating on the stock and a price target of $20, below the current price.

In June, GM announced plans to trim 25,000 hourly jobs in its U.S. operations by the end of 2008 in an effort to stem losses. The company has lost $2.2 billion in the first three quarters of this year, excluding special items. Most of those losses, about $1.6 billion, have come at its core North American auto operations.

The company's contract with the United Auto Workers union essentially prevents layoffs before it expires in September 2007, as the company needs to pay union members whether or not there is a job for them.

Wagoner said that some kind of buyout would likely be offered to speed up the job cuts, but that until the buyout packages are worked out with the union, the company can't say how many of the job cuts would come through retirement and how much through buyouts.

The assembly plants being closed are in Oklahoma City, Lansing, Mich., and Doraville, Ga., and some shifts will be eliminated at three other assembly plants.

In addition Line 1 at Spring Hill, Tenn., and Oshawa, Ontario, Car Plant No. 2, will also shut, although assembly plants on the same property will continue to operate.

GM also said it will shut eight other facilities, including stamping plants in Lansing, Mich., next year and in Pittsburgh in 2007, along with two powertrain plants, in St. Catharines, Ontario, and Flint, Mich., in 2008.

And the company will shut three parts facilities in Portland, Ore., Ypsilanti, Mich., and St. Louis by 2007.

The company said the full range of cuts will eliminate 30,000 hourly jobs. It had about 111,000 hourly U.S. workers at the start of the year.

Wagoner said he anticipates that about 7 percent of salaried, non-union staff would also be cut by the end of 2006, although he did not give a specific number of job cuts planned there.