DETROIT - General Motors plans to cut 30,000 jobs, close eight plants and trim production at several other factories by the end of 2008, CEO Rick Wagoner said last week.
The shutdowns, which include four assembly plants, will cut about 1 million units of production capacity from GM by the end of 2008, Wagoner said. The plan would allow the company to achieve $7 billion in cost reductions by the end of 2006 - $1 billion above GM's previous goal - and represents 5,000 more job cuts than the automaker had indicated at the annual shareholders meeting in June.
GM warned that it will need to take a "significant restructuring charge" associated with this plan but did not spell out how large a charge it would be or when it would be taken. Wagoner said he was not prepared to discuss the company's 2006 profit outlook.
The cuts affect about a quarter of GM's North American factory work force and are the deepest since it eliminated 21 plants and 74,000 jobs over four years beginning in December 1991.
Most of the job cuts will come through attrition and early retirement programs, Wagoner said. He noted that as much as 7 percent of GM's hourly work force retires each year, but that is not enough to reach GM's job-cutting goal.
The automaker will have to negotiate an early retirement deal with the UAW. In a conference call with financial analysts, Wagoner could not say how many of GM's hourly workers are within a year or two of retirement age. He said the average age of GM's hourly work force is in the high 40s.
Wagoner said GM plans to cut 7 percent of its salaried work force next year, bringing the total reduction of salaried workers to 40 percent since 2000.
Wagoner also increased the planned structural cost reduction to $6 billion, from the automaker's earlier target of $5 billion, and said GM will make a $1 billion cut in material costs by the end of next year. Included in those cost cuts is GM's agreement with the UAW to reduce health care costs, saving GM $1 billion a year.
"This is tough medicine for us and tough medicine for everyone in our company," Wagoner said. "We're trying to work this as effectively as we can."
Wagoner said the announcement is a "big move" from the scope of all of GM's capacity reductions made over previous years. "This will get us going," he said.
GM's scheduled assembly plant closures are:
- Oklahoma City; early 2006.
- Lansing Craft Centre, Lansing, Mich.; mid-2006.
- Doraville, Ga., minivan plant; 2008.
- Oshawa, Ontario, car plant No. 2; 2008.
- Lansing, Mich., stamping plant; 2006.
- Pittsburgh stamping plant; 2007.
- St. Catharines, Ontario, Street West powertrain parts plant; 2008.
- Flint North plant, Flint, Mich., which builds the 3.8-liter V-6 engine; 2008.
- Spring Hill, Tenn., Saturn plant Line No. 1, which produces the Ion; end of 2006.
- Oshawa, Ontario, car plant No. 1, third shift; mid-2006.
- Moraine, Ohio, truck plant, third shift; 2006.
GM also will close a parts distribution center in Portland, Ore., in 2006, while the parts distribution center in St. Louis will be converted to a crash parts warehouse.
In 2007, GM will close a parts processing center in Ypsilanti, Mich. It will close another parts processing center that year, GM said, but the site has not been determined.
4.2 million units
With the addition next year of production at the Delta Township plant in Lansing, Mich., GM will have capacity in North America of 4.2 million units a year, based on two production shifts at each plant. That would restore GM production capacity to 100 percent, Wagoner said.
GM's assembly plants in North America currently run at 74 percent, according to the company. Last year GM sold 4.6 million cars in North America.
The UAW responded to Wagoner's announcement with an angry prepared statement.
The union said it would push to keep furloughed workers on GM's payrolls for the duration of its current labor contract, which expires in 2007. That could mean that laid-off workers would continue to receive most of their pay and benefits, with the plant closings providing little immediate savings to GM.