GM to slash jobs, close more plants

updated 5:43 p.m. ET June 7, 2005

WILMINGTON, Del. - General Motors Corp. may be closing more plants and eliminating the jobs of one of every six employees in the United States, but the world’s largest automaker isn’t going out of business anytime soon.

That’s the point Chairman and CEO Rick Wagoner tried to make repeatedly and as clearly as possible Tuesday at a sometimes contentious gathering of GM shareholders in Delaware at the company’s 97th annual meeting.

But even as Wagoner laid out a four-step plan to revive GM’s troubled North American business — the crux of which involves eliminating 25,000 manufacturing jobs by 2008 from its U.S. workforce of 150,000 — he acknowledged there’s only so much the carmaker can control as it attempts a financial turnaround.

“If the U.S. market booms, if gas prices go down, if large SUVs come back, then our return to profitability will be quicker,” Wagoner said. “If the U.S. enters into a downturn and gas prices go much higher ... it’s going to be a tougher job.”

Wagoner is promising big changes for GM’s eight brands. Chevrolet and Cadillac will continue to have full vehicle lineups, he said, but GMC, Pontiac, Buick, Saturn, Saab and Hummer will be more tightly focused on niche markets. “In some cases, such as Pontiac and Buick, it will mean fewer but stronger entries in the future,” he said.

At GM, it hasn’t been this tough since the company barely escaped financial collapse in the early 1990s. Back then, it was Wagoner himself who took over North American operations and is credited with helping the automaker make great strides in quality and efficiency in the past decade.

These days, Wagoner and GM are facing perhaps an even tougher challenge: increased competition from Asian automakers and skyrocketing health care costs and pension obligations that contributed to a $1.1 billion loss in the first quarter.

Shrinking staff GM's hourly work force soon could shrink to one-third of its former size. — 1991: 258,700 — 1993: 235,240 — 1997: 160,000 — 1999: 148,000 — 2001: 126,000 — 2004: 111,000 Source: General Motors Corp.

GM’s stock, which recently fell to a 10-year low as its U.S. market share slumped to 25.4 percent from 27 percent a year earlier, would be even lower today if not for a move by billionaire investor Kirk Kerkorian to acquire 28 million shares for $31 apiece. Kerkorian’s offer was scheduled to expire on Tuesday.

General Motors shares rose 31 cents, or 1 percent, to $30.73 in trading Tuesday on the New York Stock Exchange.

Wagoner told shareholders Tuesday that health-care expenses add $1,500 to the cost of each GM vehicle. This puts GM at a “significant disadvantage versus foreign-based competitors,” Wagoner said, echoing comments made by the Standard & Poor’s and Fitch ratings services after both reduced the company’s bond rating to “junk” status last month.

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