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GM to lay off 30,000 workers

Published November 22, 2005

DETROIT (AP) - General Motors Corp., pounded by declining sales and rising health care costs, said yesterday it will cut more than a quarter of its North American manufacturing jobs and close 12 facilities by 2008. The United Auto Workers called the plan "devastating" and warned it will make negotiations more difficult, but some Wall Street analysts said GM's actions may not go far enough.

Sarah Royce
Ypsilanti Parts Processing Center will stop operations in 2007. (ALEXANDER DZIADOSZ/Daily)

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To get production in line with demand, GM will cut 30,000 jobs, which represent 17 percent of GM's North American hourly and salaried work force of 173,000, and will close nine assembly, stamping and powertrain plants and three parts facilities. GM's U.S. market share fell to 26.2 percent in the first 10 months of this year, compared with 33 percent a decade ago, the result of increasing competition from Asian rivals. GM lost almost $4 billion in the first nine months of this year.

"The decisions we are announcing today were very difficult to reach because of their impact on our employees and the communities where we live and work," GM Chairman and Chief Executive Rick Wagoner said. "But these actions are necessary for GM to get its costs in line with our major global competitors."

GM isn't the only U.S. automaker cutting costs. Last week, Ford Motor Co. told employees it plans to eliminate about 4,000 white-collar jobs in North America early next year as part of a restructuring plan.

GM said the plant closings are part of a plan to shave $7 billion off its $42 billion annual bill for operations by the end of next year. That includes a $3 billion cut in health care costs, $1.5 billion in manufacturing cuts and $1 billion in savings on materials.

The company's shares fell 47 cents, or 2 percent, to close $23.58 in trading on the New York Stock Exchange. They have traded in a 52-week range of $20.60 to $40.82.

Standard & Poor's Ratings Services, which lowered GM's debt to "junk" status earlier this year, said the company remains on credit watch. S&P said the staff cuts are substantial but may not be adequate considering GM's problems, including a possible strike at Delphi Corp., its largest supplier; an ongoing federal investigation into accounting errors; and an uncertain outlook for its new lineup of full-size sport utility vehicles, which may fall victim to consumer concerns about gas prices.

Goldman Sachs analyst Robert Barry said those headwinds could offset any gains from the cuts.

"We are not confident the restructuring addresses the core issue that GM brings too much supply to the North American market," Barry said in a note to investors.

GM has 77 facilities in North America, including 30 assembly plants, 23 stamping plants and 24 engine and transmission plants, spokesman Stefan Weinmann said.

Wagoner said the job cuts will come primarily through attrition and early-retirement packages to mitigate the impact on workers. GM has an annual attrition rate of about 7 percent, Wagoner said. The average hourly worker is around 49 years old, he said.

Some workers who don't choose to retire could go into jobs banks, which pay laid-off workers their salary and benefits. Wagoner said details about layoffs and early-retirement packages still need to be worked out with the UAW, the Canadian Auto Workers and other unions.

Earlier this month, GM's U.S. hourly workers agreed to pay more for their health care benefits, a concession UAW leaders said was necessary because of GM's financial status. But the union responded angrily to GM's latest announcement, saying the company needs to design attractive and exciting vehicles instead of trying to shrink its way to prosperity.

"Workers have no control over GM's capital investment, product development, design, marketing and advertising decisions. But, unfortunately, it is workers, their families and our communities that are being forced to suffer because of the failures of others," UAW President Ron Gettelfinger and Vice President Richard Shoemaker said in a joint statement.

The plan will cut the number of vehicles GM is able to build in North America by about 1 million a year by the end of 2008. GM will be able to build about 4.2 million vehicles a year in North America, down 30 percent from 2002. Wagoner said GM's plants are increasingly flexible and will be able to add capacity to meet market demands.