General Motors slashes 30,000 jobs

DETROIT - General Motors said today it would cut 30,000 North American manufacturing jobs and close a dozen plants as it struggles to compete with fast-growing rivals led by Toyota Motors.

The cuts affect about a quarter of the North American factory work force at GM and are the deepest since it eliminated 21 plants and 74,000 jobs over four years beginning in December 1991.

The latest plan, which affects factories in the United States and Canada, allows GM to reduce costs by US$7 billion by the end of 2006 - US$1 billion above its previous target - and increases by 5,000 the job the company had said it would cut.

The world's largest carmaker warned that it would take a "significant restructuring charge" with the plan, but did not say how much it would be or when it would be taken.

This is the largest single US layoff announcement since Kmart said it would cut 37,000 jobs in January 2003, according to employment consulting firm Challenger, Grey & Christmas.

GM Chairman and Chief Executive Rick Wagoner, who took the unusual step of denying in a letter to staff last week that GM was preparing to file for bankruptcy protection, said he was not prepared to discuss GM's 2006 profit outlook.

Shares of GM were down 25 cents at US$23.80 on the New York Stock Exchange early Monday afternoon. The company has lost nearly US$4 billion this year, while its shares have lost more than 40 per cent of their value and hit a 14-year low last week.

Plants marked for closure include those in Doraville, Georgia, Ontario, Canada, Portland, Oregon and Pittsburgh, an Oklahoma City plant that makes mid-size sport utility vehicles and GM's Lansing, Michigan Craft Center, which makes a poor-selling sport pickup truck.

Separately, GM has closed or stopped production this year at three assembly plants in Lansing, Michigan, Linden, New Jersey and Baltimore, Maryland.

Wagoner first announced plans to cut North American manufacturing capacity, in line with its shrinking market share and to match demand by 2008, at the company's annual shareholders meeting in June.

"It's a big move ... We're confident that this is what it's going to take to get us going," Wagoner told a news conference in Detroit on Monday.

GM, which was founded in 1908, said it hoped it could achieve many of the job cuts through attrition and buyouts.

'SHRINKING TO PROSPERITY?'

Wagoner said the leadership of the United Auto Workers union had been told of the plans, calling it "tough medicine for everyone involved."

The UAW responded to Wagoner's announcement with an angry statement to the media indicating it would push to keep furloughed workers on GM's payrolls for the duration of its current labour 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.

"The UAW-represented workers impacted by today's action are protected by our job security program as well as other provisions and protections of the UAW-GM National Agreement," the union said in its statement. "We have said consistently that General Motors cannot shrink itself to prosperity."

"GM's return to prosperity depends on its offering products that consumers find attractive, exciting and want to buy. Only then will GM's market share stabilise and grow, only then will revenues increase and only then will General Motors return to prosperity," the UAW said.

Pressures on Wagoner have mounted amid concerns that nothing short of a change at the top would improve the carmaker's fortunes.

Wagoner took the company's helm in 2000, but assumed control of daily operations at its North American unit in April 2005. On Monday, he dismissed any notion stepping aside.

"I haven't given any consideration whatsoever to that. I wasn't brought up to run and hide when things get tough," he said. "We're on the battlefield, we're taking the actions we need to, and I'm convinced that's the way the company is going to get righted."

Wagoner said his planned cuts in GM's North American production capacity did not mean that it would be ceding ground to Toyota as the world's No. 1 carmaker when ranked by production.

Some analysts see that as inevitable, however, and Wall Street remained uncertain about his strategy.

"The CEO is effectively trying to calm the markets and show that he's still in control," said Richard Steinberg of Steinberg Asset Management. "We would anticipate management changes over the next couple of years if they don't figure out a game plan."

Wagoner has also been under pressure from investor Kirk Kerkorian, who owns 9.9 per cent of GM's stock and may demand a seat on the board next year.

GM and its crosstown rival Ford Motor have both been grappling with high health-care and materials costs, loss of US market share to foreign rivals, and slumping sales of large SUVs that used to be their profit centres but have lost popularity as petrol prices rose.

Ford, which saw its debt ratings cut to "junk" status earlier this year along with those of GM, is expected to announce its own cuts in North American manufacturing jobs and a series of plant closings by no later than January.

In a warning issued not long after GM's restructuring announcement, Standard & Poor's said GM's credit rating could be cut further into junk territory.

- REUTERS