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  #1  
Old 22nd November 2005, 06:19 AM
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I Say... GM Dying in the US - GM ups job cuts to 30,000 jobs as it shuts plants, facilities

GM just can't cut it. How long until GM is for all intents and purposes dead? From CNN:
Quote:
NEW YORK (CNN) - General Motors Corp. said Monday it would cut 30,000 hourly jobs and close or scale back operations at about a dozen U.S. and Canadian locations in a bid to save $7 billion a year and halt huge losses in its core North American auto operations.

The cuts are 5,000 more than the 25,000 jobs GM had said it would cut in June, and represent more than 22 percent of its union work force in North America. Many of the cuts would start next year, GM said Monday, despite job protection provisions in its union contract that runs through September 2007.

GM Chairman and CEO Rick Wagoner said he expects another 7 percent of salaried workers in North America would also be cut by the end of 2006, though he gave no specific number of job cuts planned there. Seven percent would equal about 2,500 jobs in the United States and additional cuts in Canada as well.

The automaker said the plan is aimed at saving $7 billion a year by the end of 2006.

Wagoner said the cuts were what the troubled automaker needed to turn around its operations but he wasn't ready to predict when GM will return to profitability. He also wouldn't promise this would be the end of job cuts and plant closings.

"As we sit here today, it's our best guess and well thought out analysis," Wagoner said.. "If we've learned anything in the last five years, it's that there's no guarantees in this business or any other business."

Not surprisingly, the leadership of the United Auto Workers union blasted the move as unfair.

"We have said consistently that General Motors cannot shrink itself to prosperity. In fact, shrinking General Motors only exacerbates its problems," UAW President Ron Gettelfinger and Vice President Richard Shoemaker said in a joint statement. "Unfortunately, it is workers, their families and our communities that are being forced to suffer because of the failures of others," they added.

Wagoner said he had received support from the company's board of directors and from its employees as he moved forward with the cutback plans and that he had no plans to leave the company. Some investors and analysts have lost confidence in Wagoner given the company's spate of troubles this year.

"I've given no thought to anything but turning the business around," Wagoner told reporters, adding that he believes his experience with GM should help him lead that effort. "I wasn't brought up to run and hide when things get tough. I'm convinced that's the way that things get righted."

He said the moves were not due to any pressure by the board. "We're not taking these actions because of any pressure on me," he said. "We're taking these measures to get the business right."

Stock rallies, but ... GM (down $0.58 to $23.47) stock opened higher on the news but turned lower in afternoon trading as a growing number of investors and analysts said that while the plan addressed costs, it did not deal with the automaker's lackluster product offerings.

"The plan is essentially as expected, meaning not terribly aggressive," UBS analyst Rob Hinchliffe wrote in a note to clients, adding that the company's market share, which has been sliding, may fall further. He kept a sell rating on the stock and a price target of $20, below the current price.

In June, GM announced plans to trim 25,000 hourly jobs in its North American operations by the end of 2008 in an effort to stem losses. The company has lost $2.2 billion in the first three quarters of this year, excluding special items. Most of those losses, about $1.6 billion, have come at its core North American auto operations.

The company's contract with the United Auto Workers union essentially prevents layoffs before it expires in September 2007, as the company needs to pay union members whether or not there is a job for them.

Wagoner said that some kind of buyout would likely be offered to speed up the job cuts, but that until the buyout packages are worked out with the union, the company can't say how many of the job cuts would come through retirement and how much through buyouts.

The assembly plants being closed are in Oklahoma City, Lansing, Mich., and Doraville, Ga., with the first two closing next year and Doraville slated to shut in 2008.

Some shifts will be eliminated at three other assembly plants, including Line 1 at Spring Hill, Tenn., and Oshawa, Ontario, Car Plant No. 2, which will both be shut, although assembly plants on the same property will continue to operate.

Other facilities to be closed include stamping plants in Lansing, Mich., next year and in Pittsburgh in 2007, along with two powertrain plants, in St. Catharines, Ontario, and Flint, Mich., in 2008.

And the company will shut three parts facilities in Portland, Ore., Ypsilanti, Mich., and St. Louis by 2007. One other parts facility yet to be identified will also be closed.

With the announced closings, GM is essentially keeping its capacity of large sport utility vehicles and pickups intact, even though big SUVs sales have slumped in recent months in the face of higher gasoline prices.

Wagoner said he believed that a new line of large SUVs due early in 2006 should give a lift to those sagging sales, and that some of its large SUV capacity is being changed to produce either SUVs or pickups, depending upon demand. He said GM needs to keep capacity for the vehicles that it can sell at the greatest profit -- namely the larger vehicles.

Among the vehicles made at the assembly plants being closed are the Chevrolet Impala and its twins, the Saturn Ion, its minivans, the SSR sport pickup and some mid-sized SUVs. The company will have a North American capacity of about 4.2 million vehicles a year at its own plants, down from about 5 million.

"Oklahoma City, (which makes the mid-sized SUV) is a very good plant but a classic example of ... just having too much capacity in that segment," said Wagoner. "That's why that plant in on the list today. We don't have any plants left that aren't very high quality and quite productive. I'm sure I'm not going to satisfy any plant as why they've been chosen to be on the list."

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  #2  
Old 22nd November 2005, 07:48 AM
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Let's not be too hasty....

Granted they are in deep trouble. However I remember Chrysler seemingly in the same boat with share prices under $5.00. This was in the late 70's.

The question is will GM be able to find a "Lee Iacoca".

Or will dinosaur management plod along to destruction while the unions insist on feeding of the carcass.

James

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Old 22nd November 2005, 08:16 AM
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In Reply to Parent Post by JRKH

Granted they are in deep trouble. However I remember Chrysler seemingly in the same boat with share prices under $5.00. This was in the late 70's.

The question is will GM be able to find a "Lee Iacoca".

Or will dinosaur management plod along to destruction while the unions insist on feeding of the carcass.

James
"Iacoca" made a huge difference for Chrysler at that time by being a "leader" (JMHO), and the $1.00 per year salary was a great piece of PR work on his part. To bad he has slid down to being a pitchman teamed up with Snoop Dogg.

Chrysler also sold off some very valuable assets (AM General) that helped in bolstering their recovery, or at least showed they were committed to making a decent attempt. Other than the plant closures and hourly workforce reductions I don't see the same level of committment from the Mr. Wagoner and those at the top of the GM heap. They still don't get it IMHO. The "dinosaur management", as you so aptly phrased it, is still trying to figure out why it was that in 2003 Toyota had an annual profit of 8.3 billion, which was larger that all 3 of the big 3 combined. They just don't get it.
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Old 22nd November 2005, 08:25 AM
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I'm not interested in the share price of the company. It has to do with GM as a company being able to build and sell cars (providing jobs in the US).

As to Chrysler, I remember BailOut with US tax money where every tax paying US citizen got to pay to keep Chrysler in business. Give me the equivalent money in today's $ Lee Iacoca got and I could probably help out GM.

Not to mention - Where is Chrysler now? It's a shadow of it's former self, not to mention it's DaimlerChrysler.

Ford and GM will both soon bite the dust for all intents and purposes in so far as their providing jobs in the US.

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Old 22nd November 2005, 08:50 AM
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One aspect of the Chrysler story that is often overlooked is that Iaccoca did not go to the government empty handed - he took with him not only a plan to restructure but laid before congress the K-car (the company's plan to turn away from the large cars that couldn't compete against the foreign competition).

GM, Ford and DCX have all in recent years moved towards large SUV's and high performance (both non-competitive during a fuel-crisis), both which are precisely what the customer wanted (at the time), but unlike their Asian competitors they haven't been working on the other end of the spectrum as well.

Look at Honda as an example. Just this year they introduced for the first time in their history a fairly large pick-up truck, but at the same time they have introduced several smaller hybrid cars that are capable of carrying sales when the bottom falls out of the truck market.

You'll find this same practice happening over at Toyota as well. American auto manufacturers have missed the boat when it comes to product change-over, and in a world where the ecomomy (and the whims of the buying public) change so rapidly - this is a big miss.
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Old 22nd November 2005, 08:58 AM
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Unfortunately, Marc, you and I are alone in that opinion. Somewhere in the board rooms of corporate past, holding share price up for the 30 elite who do care, became more valuable than the economic contribution of 30000 laborers. I suggested in a related thread GM should switch to building electric cars. Now that I think about it - That would be the other shoe hitting to floor. The war - The oil - The government corruption. I'm just disgusted with whole discussion.
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Old 22nd November 2005, 09:12 AM
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Quote:
In Reply to Parent Post by ddhartma

One aspect of the Chrysler story that is often overlooked is that Iaccoca did not go to the government empty handed - he took with him not only a plan to restructure but laid before congress the K-car (the company's plan to turn away from the large cars that couldn't compete against the foreign competition).

GM, Ford and DCX have all in recent years moved towards large SUV's and high performance (both non-competitive during a fuel-crisis), both which are precisely what the customer wanted (at the time), but unlike their Asian competitors they haven't been working on the other end of the spectrum as well.

Look at Honda as an example. Just this year they introduced for the first time in their history a fairly large pick-up truck, but at the same time they have introduced several smaller hybrid cars that are capable of carrying sales when the bottom falls out of the truck market.

You'll find this same practice happening over at Toyota as well. American auto manufacturers have missed the boat when it comes to product change-over, and in a world where the ecomomy (and the whims of the buying public) change so rapidly - this is a big miss.
Yes David!

One of the basics of investing is being diversified. That way if, say, your telecommunications stocks take a hit hopefully your real estate investments (and others) will take up the slack. When the dot.bomb bubble burst, the folks who really hurt were the ones who were overly exposed in the tech market. They went after the quick buck.

Here we have some "very smart people" (dripping with sarcasm) who bet the company on pickups and SUVs. If they had put a little less effort in yet another flavor of SUV and a little more effort in a small, interesting, and efficient car, maybe 30,000 people would not be anticipating pink slips.

Sad that its the screw ups who will still be collecting paychecks.
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Old 22nd November 2005, 09:21 AM
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Very true Marc. It is difficult to sell / continue selling the oversized, heavy fuel drinking behemoths that seem to have taken over American automobile production.
I have often wondered / thought (sometimes out loud) that the perceived demand in the SUV / Light Truck market was created by Madison Avenue through the marketing of a "lifestyle" to support higher profit margin vehicle lines at the expense of the research & development of new technologies and vehicles / product lines that meet the governments "CAFE" standards. Why would they work to develop fuel efficient or alternative energy vehicles that would require capital intensive re-tooling of existing facilities or building new ones when they can successfully market the SUV. If my memory serves me correctly SUV's, when they were first introduced, were not included for calculation of the fleet fuel efficiency average, weren't required to meet the same FMVSS requirements as autos, and in many instances were built off of existing platforms / chassis that required minimal skin changes to the older models (ie: UN-93 Expedition or UN-46 / 105 / 152 Explorer). I mean just how much safer are you in an Explorer than in a Taurus? Instead of trying to compete with the Asian automakers by building a higher quality, more fuel efficient auto they chose a course that let them realize the highest level of profit in the short term while gambling against their long term viability & whittling away at the economies of a good number of communities.

I too remember the bail out, and would not be altogether surprised should both GM & FORD end up in the same boat, although I am not sure it would be as readily accepted as it was in the 70's. Afterall aren't TIF districts & economic development zones created by local & county governments already a subsidy of the same nature as the bailout?
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