GM to cut jobs, bonuses, and dividend


Super Moderator

An article from "Automotive News."

I hope this is considered "fair use."



GM to cut jobs, bonuses, and dividend

Moves will raise $15 billion in liquidity by end of 2009

July 15, 2008 - 8:45 am ET

DETROIT (Reuters) - General Motors said today it would cut salaried employment costs by 20 percent, sell up to $4 billion of assets and borrow at least $2 billion in a bid to bolster its liquidity by $15 billion through 2009.

GM CEO Rick Wagoner, speaking to employees before a 9 a.m. press conference, also said GM would suspend its common stock dividend in a restructuring driven by high fuel prices, a shift away from trucks and SUVs, and the lowest U.S. industrywide auto sales in a decade.

Wagoner also said GM would be allowed to wait until 2010 to make its first scheduled payment into the UAW's health care benefit trust fund for retirees. The establishment of the trust fund was a key part of the 2007 contract agreement with the union.

GM said it expects to generate $10 billion in cash savings from operations through 2009. It said it expects to capture those savings through steps that include cutting white-collar jobs and some retiree health-care coverage, eliminating executive bonuses for 2008, and reducing capital spending by $1.5 billion.

GM shares rose 2.8 percent to $9.65 in premarket trade after the restructuring news.

The largest U.S. automaker has been under intensifying pressure to cut costs and raise capital because of the deepening slump in U.S. auto sales.

In early June, Wagoner announced the company would close four North American truck plants and try to sell its Hummer brand in response to higher gas prices.

But market sentiment has darkened on GM and the auto sector in the weeks since that announcement, with most analysts no longer expecting a real recovery in U.S. auto sales in 2009.

PRESS RELEASE: GM to Bolster Liquidity by $15 Billion through 2009

* Operating and related actions to generate approximately $10 billion in cash improvements

* More than 20 percent reduction in salaried employment cash costs

* Dividend on common stock suspended

* Asset sales and capital market activities to raise $4-7 billion of additional liquidity

DETROIT - General Motors Corp. (NYSE: GM) today announced it is taking further steps to adapt its business to rapidly changing market conditions, marked by the weak U.S. economy, record high fuel prices, shifts in consumer vehicle preferences, and the lowest U.S. industry sales volumes in a decade.

"We are responding aggressively to the challenges of today's U.S. auto market," said GM Chairman and CEO, Rick Wagoner. "We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix. We remain committed to bringing to market great products that target changing consumer preferences for more fuel-efficient vehicles." Wagoner noted that 11 of GM's 13 most recent major U.S. product launches, and 18 of its next 19 launches, are cars and crossovers, which are key growth areas.

"Today's actions, combined with those of the past several years, position us not only to survive this tough period in the U.S., but to come out of it as a lean, strong and successful company," Wagoner said.

For liquidity planning purposes, GM is using assumptions of U.S. light vehicle industry volumes of 14.0 million units in 2008-2009 which are significantly below trend. Other planning assumptions include lower U.S. share of approximately 21 percent and continued elevated average oil price estimates ranging from $130 to $150 per barrel by 2009. Based on those assumptions, GM is taking actions to further reduce structural cost, and generate cash, with the goal of maximizing liquidity.

At the end of the first quarter 2008, GM had liquidity of $23.9 billion, with access to U.S. credit facilities of an additional $7 billion. While the company has ample liquidity to meet its 2008 funding requirements, it is taking additional measures to bolster liquidity to protect against a prolonged U.S. downturn. The actions include a combination of operating and related actions, as well as asset sales and capital market activities. The cumulative impact on cash through 2009 is projected to be approximately $15 billion.

Operating and Other Actions

Through a number of internal operating changes and other actions, GM expects to generate approximately $10 billion of cumulative cash improvements by the end of 2009, versus original plans.

* GM plans further salaried headcount reductions in the U.S. and Canada in the 2008 calendar year, which will be achieved through normal attrition, early retirements, mutual separation programs and other separation tools. In addition, health care coverage for U.S. salaried retirees over 65 will be eliminated, effective January 1, 2009. Affected retirees and surviving spouses will receive a pension increase from GM's over funded U.S. salaried plan to help offset costs of Medicare and supplemental coverage. And there will be no new base compensation increases for U.S. and Canadian salaried employees for the remainder of 2008 and 2009.

Beyond these moves, which also impact GM executives, additional actions are being taken. There will be no annual discretionary cash bonuses for the company's executive group in 2008. With the elimination of the annual cash bonus, combined with GM's long-term incentives which are driven by GM stock price performance to assure alignment with its stockholders, GM's executive group will have a significant reduction in their cash compensation opportunity for 2008. For the company's top executive officers, it represents a reduction in their cash compensation opportunity of 75 to 84 percent.

These benefit changes, salaried headcount reductions and other related savings will result in an estimated reduction in cash costs of more than 20 percent, or $1.5 billion in 2009.

* Additional structural cost reductions of approximately $2.5 billion are expected in GM North America (GMNA). The reductions will be partially achieved through further adjustments in truck capacity and related component, stamping and powertrain capacity in response to lower U.S. industry volume. Truck capacity is expected to be reduced by 300,000 units by the end of 2009, half of which is from acceleration of prior announced actions, and half from new capacity actions.

In addition, GM will reduce and consolidate sales and marketing budgets, with a focus on protecting launch products and brand advertising. Engineering spending in 2008 and 2009 will be held at 2006-2007 levels, substantially lower than original plans. These operating actions, combined with the benefits of the 2007 GM-UAW labor agreement, are targeted to reduce North American structural cost from $33.2 billion in 2007 to approximately $26-27 billion in 2010, a reduction of $6-7 billion.

* GM is revising its capital spending plan and reducing approximately $1.5 billion in expenditures versus prior plans. Capital expenditures are now estimated to total $7 billion in 2009 versus prior plans of $8.5 billion (these figures do not include the $1 billion in capital spending planned in both 2008 and 2009 in China, which is self-funded by the GM joint ventures, to support growth in that market). A major part of the reductions is related to the delay of the next generation large pickup and SUV program, as well as V-8 engine development and associated capacity.

Spending for non-product programs will also be significantly reduced, while powertrain spending will be increased to support the development of alternative propulsion and fuel economy technologies and small displacement engines. The revised 2009 capital spending plan is higher than the average capital expenditures in 2005-2007, excluding large pickup and SUV-related spending. Excluding China, GM expects capital expenditures to run in the $7-7.5 billion range beyond 2009.

* Aggressive actions are being taken to improve working capital by approximately

$2 billion in North America and Europe, primarily related to the reduction of raw material, work-in-progress and finished goods inventory levels as well as lean inventory practices at parts warehouses.

* GM will defer approximately $1.7 billion of payments that had been scheduled to be made to a temporary asset account over the balance of 2008 and 2009 for the establishment of the new UAW VEBA.

* The GM Board of Directors has decided to suspend future dividends on common stock, effective immediately, which is expected to improve liquidity by approximately $800 million through 2009.

Asset Sales and Financing Activities

In addition to the operating changes and other actions, GM expects to raise additional liquidity of $4-7 billion through asset sales and financing activities.

* GM is undertaking a broad global assessment of its assets for possible sale or monetization, which is expected to generate approximately $2-4 billion of additional liquidity. The company believes there is significant liquidity potential from asset sales, without impacting the strategic direction of the company. Outside advisors are currently engaged in evaluating alternatives. A strategic analysis of the Hummer brand is underway, and GM is continuing to focus on profit improvement initiatives across all remaining GM brands.

* GM will continue to opportunistically access global markets to raise additional liquidity. The company is initially targeting at least $2-3 billion of financing. The company has gross unencumbered assets of over $20 billion, which could support a significant secured debt offering, or multiple offerings, that would far exceed the initial target. Examples of such assets include stock of foreign subsidiaries, brands, stake in GMAC, and real estate.

Actions outlined today comprehend the anticipated impact of second quarter results, which the company plans to announce in the near future. GM anticipates it will report a significant second quarter loss, driven in part by the previously disclosed negative impact of the American Axle and local union strikes in North America, as well as the continued weakness in the U.S. auto market and adverse vehicle segment mix.

In addition, the company expects to record significant charges or expenses related to its previously announced hourly attrition program in the U.S., the recently announced North American truck capacity actions, valuation of GMAC stock, lease assets, Delphi recoveries, the American Axle settlement, the Canadian labor contract, and others.

GM is highly confident that the initiatives announced today, in conjunction with the current cash position and its $4-5 billion of committed U.S. credit lines, will provide the company with ample liquidity to meet its operational needs through 2009.

"The actions announced today are difficult decisions, but necessary to respond to the current auto market conditions," said Wagoner. "Even under conservative planning scenarios, GM is well-positioned to withstand the U.S. market downturn and emerge a stronger company. We have a solid position in the rapidly growing emerging markets, a global operating framework that allows us to respond to changes in the U.S. market, a commitment to technology leadership, and an ever stronger and competitive product line-up."

Jim Wynne


An article from "Automotive News."

I hope this is considered "fair use."



GM to cut jobs, bonuses, and dividend

Moves will raise $15 billion in liquidity by end of 2009

July 15, 2008 - 8:45 am ET

DETROIT (Reuters) - General Motors said today it would cut salaried employment costs by 20 percent, sell up to $4 billion of assets and borrow at least $2 billion in a bid to bolster its liquidity by $15 billion through 2009. <snip>

I just saw this story on Yahoo News and it was accompanied by a photo (attached) that seems appropriate.


  • GM to cut jobs, bonuses, and dividend
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Scott Catron

True Artisan
Super Moderator
US stocks extend losses amid worries about financials, Bernanke's remarks about the economy

NEW YORK (AP) -- Stocks were knocked lower again Tuesday as investors grappled with escalating instability in the financial sector and sobering comments from Federal Reserve Chairman Ben Bernanke. The Dow Jones industrial average fell about 200 points.

Wholesale prices soar in June; sales are sluggish

WASHINGTON - The economy showed the depth of its twin problems on Tuesday, slow growth and rising inflation, as the nation wrestled with a teetering financial system, a slumping dollar and rising prices for food and fuel.

US retail sales slow by more-than-expected in June

WASHINGTON (AFP) - US retail sales slowed by more-than-expected in June, rising a mild 0.1 percent as American consumers cut back on spending at the nation's malls, a government reported showed Tuesday.

Paulson should consider receivership for Fannie, Freddie

(Reuters) - The U.S. Treasury Secretary could make greater progress toward a safer financial system by putting Fannie Mae and Freddie Mac into federal receivership, the Wall Street Journal said on Tuesday.

Bank shares plummet amid stability fears

NEW YORK (Reuters) - The shares of major U.S. banks plunged on Monday amid fears about the sector's stability following Friday's seizure by regulators of IndyMac Bancorp Inc (IMB.N) as withdrawals by panicked depositors led to the third- largest U.S. banking failure.

What is this? October 1929?


Super Moderator
Trusted Information Resource
IMHO, media hype does nothing to help the situations. It is a downward spiral. Something goes up or down, the media jump on it like the sky is falling. Readers/consumers see the news and voila, "wow, the economy is going to #3!! in a handbasket! We need to start hoarding, selling, buying, saving, spending (pick your poison)". The next thing you know is that it is a self fulfilling prophecy. If you believe that the media is fair and unbiased, you are sadly mistaken. Doom and gloom sells, good news does not.


Super Moderator


From Automotive News.



VW chooses Tennessee for new U.S. plant

April Wortham
and Bettina Mayer
Automotive News
July 15, 2008 - 10:27 am ET
UPDATED: 7/15/08 10:49 a.m. EDT

Volkswagen AG announced today that it will build a factory in Chattanooga, Tenn.

Initial production capacity for the $1 billion plant is expected to be 150,000 vehicles, including a new mid-sized sedan designed for North America. Production is scheduled to begin in early 2011.

"The U.S. market is an important part of our volume strategy, and we are now very resolutely accessing that market," said VW group CEO Martin Winterkorn.

Winterkorn said the factory will play a key role in boosting VW brand sales in the United States to 800,000 units by 2018.

As recently as last week, most speculation had VW locating the plant in Alabama. Michigan was a distant third choice for the project.

Winterkorn said Chattanooga was chosen because of its supplier infrastructure, qualified workforce and transport connections. The factory will employ 2,000 workers.

Winterkorn said the factory also will help VW counter the effects of exchange rate fluctuations.

Increasing U.S. sales is crucial to VW's goal of rivaling Toyota's global sales within 10 years. Last year, VW group sold 324,078 units in the U.S., including 230,572 VWs and 93,506 Audis.

VW's plans to increase its group U.S. sales to 1 million by 2018: 800,000 VWs and 200,000 Audis.

VW, Europe's largest carmaker, closed its last U.S. production facility near Pittsburgh in 1988.


HERNDON, Va. (July 15, 2008) -- Volkswagen Group of America, Inc. announced today that it will build a U.S. automotive production facility in Chattanooga, Tenn., where it will produce a car designed specifically for the North American consumer and invest $1 billion in the economy. The announcement is an important element of the company's overall U.S. strategy of connecting with its customers, increasing its competitiveness and tripling its U.S. customer base in the next decade.

"The U.S. market is an important part of our volume strategy and we are now very resolutely accessing that market," said Prof. Martin Winterkorn, CEO of Volkswagen AG. "Volkswagen will be extremely active there. This plant represents a milestone in Volkswagen's growth strategy. We will be selling 800,000 Volkswagens in the U.S. by 2018, and this new site will play a key role. This, along with our growth strategy, is a prerequisite for the economic success of the company in the dollar region. We look forward to establishing an important mainstay for ourselves when we become the biggest European carmaker there."

"This is a significant step forward in achieving our goals in the U.S. market and a clear sign of the Volkswagen Group's commitment to the North American consumer. Today's decision is a fundamental part of our new strategic direction in the U.S. and our five-pillar strategy," said Stefan Jacoby, President and CEO of Volkswagen Group of America. "Chattanooga is an excellent fit for the Volkswagen culture, having an exceptional quality of life and a long manufacturing tradition."

The company will build the facility in the Enterprise South Industrial Park, located 12 miles northeast of downtown Chattanooga. The 1,350-acre site is 100 percent owned by the city of Chattanooga and Hamilton County and is certified as an industrial megasite by the Tennessee Valley Authority. Enterprise South is adjacent to Interstate 75. Initial production capacity for the facility is anticipated to be 150,000 vehicles, including a new midsize sedan designed specifically for the North American market. Production is scheduled to begin in early 2011.

"I'm enormously pleased by the announcement from Volkswagen Group of America and grateful for the company's investment in Chattanooga and in the people of Tennessee," said Tennessee Gov. Phil Bredesen. "I believe Volkswagen chose Tennessee because of our shared values, our commitment to innovation and our strong respect for the environment. This project will have a significant impact on the economy of Tennessee and the region for decades to come."

"I couldn't be more pleased that the spirit of partnership between the state of Tennessee, Volkswagen and the government and business leadership of Chattanooga and Hamilton County has resulted in this significant investment in Enterprise South," said Matt Kisber, commissioner of the Tennessee Department of Economic and Community Development. "Volkswagen's investment in this community means the hard work and dedication demonstrated by people at the state and local level to create one of the best business climates in the country is paying off."

"We started with a vision of transforming an idle Army facility into the source of thousands of family-wage jobs," said Hamilton County Mayor Claude Ramsey. "Over the last 14 years, I've worked with four different city mayors as well as county commissioners, city councilmen and countless others in overcoming barriers and objections to that plan. Today, we stand with our new friends from Volkswagen to make a historic announcement that will create new opportunities for our community for years to come."

"Volkswagen and Chattanooga have a lot in common," said Chattanooga City Mayor Ron Littlefield. "Both are serious about environmental sustainability and 21st Century manufacturing."

Environmental responsibility is a core value of the Volkswagen Group. The company's focus on sustainable mobility and environmentally responsible manufacturing are right in line with Chattanooga's strong environmental commitment. As an expression of this shared commitment, the state of Tennessee, Volkswagen and Chattanooga-area organizations are partnering to distribute two saplings for every tree displaced by the project. The new trees will be planted by local school children.

According to United States Sen. Bob Corker, who was mayor of Chattanooga when the city and Hamilton County acquired the land and established Enterprise South as an industrial park, the Volkswagen announcement represents a new chapter in Chattanooga's success story. "Through twists and turns, our community has maintained focus, invested wisely and exercised tremendous effort and energy in recruiting a major employer to Enterprise South. The breaking of this final barrier and the realization of the vision to which we have held true will take us to levels we can only begin to imagine," said Corker.

He continued, "Volkswagen is the very best manufacturer and partner we could possibly have in terms of our shared values, and as a result of their enormous investment, not only will Chattanooga be forever changed, but our entire state will reap great benefits from the new suppliers that this facility will attract to the region. I am proud to have been part of a dedicated team that has worked seamlessly on this effort and celebrate this outstanding achievement for our city and our state."

United States Sen. Lamar Alexander praised Volkswagen's decision to locate at Enterprise South, saying, "Volkswagen and Chattanooga, the ideal marriage: one of the world's most admired companies and one of America's most livable cities. This decision keeps Tennessee on the road to becoming the No. 1 state in auto jobs. Congratulations especially to Gov. Bredesen, Sen. Corker and Mayors Ramsey and Littlefield for their leadership," Alexander concluded.

"Over the past seven months, more than 100 Tennesseans at the local, state and federal level have worked odd hours on short deadlines to help us reach this day," said Trevor Hamilton, vice president of economic development for the Chattanooga Area Chamber of Commerce. "From this day forward, we dedicate ourselves to partnering with Volkswagen to move from construction to production as quickly as possible. We will unify our team with Volkwagen's to ensure long-term success for the company, our community and the state of Tennessee."

With the new plant, Volkswagen will bring about 2,000 direct jobs to the area, and will add a significant number of jobs in related sectors. It is expected that these jobs will come from the tri-state area, pulling from the labor force of Tennessee as well as Georgia and Alabama. Volkswagen of America received an attractive, comprehensive package of incentives for the new facility from Gov. Bredesen's office and the Tennessee Department of Economic and Community Development. The statutory incentives are tied to job creation and capital investment. Additional support includes assistance for public infrastructure and job training, each designed to ensure the local economy best leverages Volkswagen's investment to benefit the local work force and ensure the facility's success.

"This area has a deep base of well-trained labor, with excellent engineering and manufacturing programs at the universities and technical colleges," added Jacoby. "Thanks to the visionary leaders and people of Chattanooga, we're confident that the values of this area are compatible with our own, and we envision a long and productive partnership."

Last year, Volkswagen outlined a new strategic direction in the U.S. based on five pillars: product, brand positioning, dealer network, organization and local production. As it moved forward to assess the potential for local production, the company considered many other site options and earlier this year had narrowed its search to Alabama, Michigan and Tennessee.

"We reviewed three excellent sites, all of which had the specific qualities necessary to build a plant in the United States," said Jacoby. "Both Gov. Granholm and Gov. Riley were strong advocates on behalf of their states and the citizens they represent. This was a difficult decision, but we look forward to continuing our relationships with both states. I thank both governors and their staffs."


Super Moderator
Trusted Information Resource
LOL, the US automakers produce their vehicles in Mexico and Canada and the foreign auto manufacturers build new plants in the US. What a crazy mixed up world we live in.


Super Moderator
Folks in this area have been closely watching this to see whether VW would choose Huntsville, AL or Chattanooga. There are some very happy folks in southeast TN, northwest GA and northeast AL today! :biglaugh:


Super Moderator
LOL, the US automakers produce their vehicles in Mexico and Canada

To escape unions and legacy costs.

and the foreign auto manufacturers build new plants in the US.

They build them in predominantly Southern States:
  • Low cost
  • Some States provide unbelievable ($$$$) incentives
  • Low taxes
  • Lower wages
  • No unions

What a crazy mixed up world we live in.

I agree, but that's the way it is, and it will never change...:(


Wes Bucey

Prophet of Profit
LOL, the US automakers produce their vehicles in Mexico and Canada and the foreign auto manufacturers build new plants in the US. What a crazy mixed up world we live in.

  1. declining value of dollar versus other "hard" currencies (yen, euro, British pound) - makes real estate and equipment relatively cheap [same reason US manufacturers go to Mexico or Canada (currency has turned the other way recently)]
  2. freedom from risk of political upheaval plus ready availability of skilled [already trained] labor)
  3. no "legacy" labor contracts - new plants by foreign manufacturers in USA do not have salary or benefit levels of existing USA manufacturing plants - same for USA companies going to Canada or Mexico.
  4. capacity to incorporate new manufacturing techniques and machines in new facilities - no aging [inefficient] infrastructure to renovate or replace
  5. leaner hierarchy in management - much flatter, no multiple levels of "drone" bureaucrats who do not generate value.
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