GM Gets Ready to Detail Job Cut Plan
{{#rendered}} {{/rendered}}As General Motors Corp. (GM) prepares to announce much-awaited job cuts and U.S. assembly plant closings, analysts wonder if the cuts will be aggressive enough to convince people of a possible turnaround at the ailing auto giant.
The world's largest automaker, which has lost nearly $4 billion this year, has said it will provide details by the end of 2005 about its previously announced plan to cut at least 25,000 manufacturing jobs as part of a broader restructuring plan.
"Announcing the plan alone will not be enough," Standard & Poor's equity analyst Efraim Levy said on Friday. "If the plan is not concrete, not enough, or not realizable, Wall Street could take it negatively."
{{#rendered}} {{/rendered}}Chief Executive Richard Wagoner has committed to a series of plant closings and the elimination of nearly a quarter of GM's U.S. factory work force through 2008.
"They need to lose a lot more jobs through 2008. The 25,000 number is the natural attrition rate, and they need to go beyond the ordinary to accomplish any change. They need more, a lot more," Levy said.
GM has been grappling with high health-care and commodities costs, loss of U.S. market share to foreign rivals, and slumping sales of large sport utility vehicles which used to be its profit center, but have now lost popularity due to high gasoline prices.
{{#rendered}} {{/rendered}}To make matters worse, GM's main parts supplier -- bankrupt Delphi Corp. -- is battling with its unions and will ask the court to void its labor contracts if a deal is not reached by mid-December. A strike at Delphi could shut down some GM and Delphi plants and could force the automaker to burn through billions of dollars a week, analysts have said.
A work stoppage could also cripple GM, Delphi's largest customer, as it prepares to roll out its GMT-900 truck series, a crucial component of its recovery plan.
Wagoner in June said the proposed cuts would save the automaker $2.5 billion a year. But analysts worry about expenses associated with the cost cuts, and some estimates predict that early retirement and employee relocation costs could total up to $2 billion.
{{#rendered}} {{/rendered}}As investors await the changes, the Detroit News on Friday reported GM plans to make the announcement as early as next week.
"We have said that we will make announcements by the end of the year and that's what we will be doing," GM spokesman Stefan Weinmann said. "And we won't provide any more specifics."
Wagoner has said he plans to cut manufacturing capacity to match demand by 2008. Some experts believe The Lansing Craft Center, where GM builds the Chevrolet SSR, will likely be shut down because the convertible sport pickup has not been selling very well and GM has idled the plant for several months this year.
{{#rendered}} {{/rendered}}At least two other plants likely to be shut down are the Doraville, Georgia, plant, which builds GM's minivans, and an SUV plant in Janesville, Wisconsin, analysts said.
The new plant closings will add to three assembly plants that GM has already closed or stopped production at this year: a car plant in Lansing, Michigan, an SUV plant in Linden, New Jersey, and a van plant in Baltimore.
GM will also have to shed its old habit of keeping furloughed workers on the payroll and typically cutting factory jobs only by retiring workers after 30 years of services, analysts say.
{{#rendered}} {{/rendered}}Analysts also worry that GM's proposed sale of a 51-percent stake in its finance arm will reduce pressure to undergo a major restructuring, as the sale could bring in as much as $15 billion.
Still, GM shares rose 96 cents, or 4.3 percent, to $23.60 in Friday trade on the New York Stock Exchange.