Detroit, Michigan – General Motors has announced more job cuts and suspension of dividends on common stock.
“We are responding aggressively to the challenges of today’s U.S. auto market,” said Rick Wagoner, GM Chairman and CEO. “We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix. We remain committed to bringing to market great products that target changing consumer preferences for more fuel-efficient vehicles. Today’s actions, combined with those of the past several years, position us not only to survive this tough period in the U.S., but to come out of it as a lean, strong and successful company.”
GM said that at the end of the first quarter of 2008, it had liquidity of US$23.9 billion, with access to credit facilities of an additional US$7 billion, and is taking additional measures to bolster liquidity to protect against a prolonged U.S. downturn. Through changes outlined by Wagoner, it expects to generate approximately US$10 billion of cumulative cash improvements by the end of 2009.
The company plans to cut salaried jobs in the U.S. and Canada in 2008, through normal attrition, early retirements, mutual separation programs and other programs. As of January 1, 2009, the company will also eliminate healthcare coverage for U.S. salaried retirees over 65, with affected retirees and surviving spouses receiving a pension increase to help offset Medicare and supplemental costs. GM also announced there will be no new base compensation increases for U.S. and Canadian salaried employees for the remainder of 2008 and 2009. The company said the moves will also affect GM executives. In addition, the company will not pay annual discretionary cash bonuses for the executive group in 2008. These changes are expected to reduce cash costs by more than 20 per cent, or US$1.5 billion in 2009. The GM Board of Directors has decided to suspend future dividends on common stock, effective immediately, which is expected to improve liquidity by approximately US$800 million through 2009.
Additional cost reductions of approximately US$2.5 billion are expected in GM North America, partially through further reductions in truck capacity and related component, stamping and powertrain capacity; truck production is expected to be reduced by 300,000 units by the end of 2009. The company will also reduce and consolidate sales and marketing budgets; hold engineering spending in 2008 and 2009 to 2006-2007 levels; delay the next-generation large pickup and SUV program, along with V8 engine development; and perform a strategic analysis of the Hummer brand.