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GM to Cut 10,000 More U.S. Jobs as Losses Continue—Report
30 May 08
General Motors has announced that 19,000 of its U.S. workers have taken up buyout offers this year, but more are needed as truck sales and profits continue to evaporate.
Global Insight Perspective | | Significance | General Motors has announced that 19,000 of its U.S. blue-collar employees have accepted the latest round of buyout offers, bringing the total number of personnel cut from the company's roster to nearly 44,000 since 2005. However, the company is expected to undergo further restructuring soon that will see the elimination of as many as 10,000 more jobs. | Implications | The current economic troubles, combined with rising fuel and food prices and a housing market in the doldrums, are conspiring to keep employees from accepting the increasingly lucrative buyout offers. | Outlook | The sharp, rapid decline in the truck market is forcing all of the Detroit automakers to evaluate their rosters in a bid to salvage their turnaround plans as profits simply dry up. |
General Motors (GM) may soon announce plans to further trim its U.S. workforce, hot on the heels of news that rival Ford Motor Company may cut as much as 12% of its white-collar workforce. GM announced late yesterday that 19,000 blue-collar personnel have opted to take up the latest round of buyout offers. "Despite significant challenges in the U.S. market, we continue to reshape our business for long-term success", Troy Clarke, president of GM North America, said in a statement. "This attrition program gives us an opportunity to restructure our U.S. work force through the entry-level wage and benefit structure for new hourly employees", he added. Unlike Ford, GM is looking for further blue-collar attrition, and reports by Bloomberg News indicate that it may look for as many as 10,000 more buyouts in the coming months. In total, GM has trimmed its workforce by 44,000 in the past three years, in a combined effort to cut costs, scale back capacity, and enact a new contract with the United Auto Workers (UAW) union that allows the company to bring in new workers on much lower wages. General Motors has offered buyouts worth as much as US$63,000 for cases of early retirement to all of its 74,000 blue-collar employees. There has been no word as to whether GM intends to sweeten the deal even further with another round of buyouts; an announcement is expected at or shortly before the 3 June shareholders’ meeting. However, buyouts may not be enough in the wake of mounting losses as a result of several strikes, including a three-month shutdown of most of the company's big-truck plants as the UAW staged industrial action at supplier American Axle Manufacturing. "We probably need to trim back some truck and SUV capacity", said GM Sales Vice-President Mark LaNeve in an interview with Bloomberg. "We need to add on the cars and crossovers and we need to continue to fine-tune our overall truck output", he added. Along with the rest of the domestic automakers, the company is reeling from a 30% increase in U.S. fuel prices since January, and the effect this has had on sales of big trucks and sport utility vehicles (SUVs). "The biggest issue we're dealing with now in profitability is how weak the truck market is", LaNeve said. "We have better profits in trucks; everybody has better profits in trucks." Outlook and Implications The buyouts being offered by General Motors have drastically reduced its workforce, but it is still coming up short of its targets. The combination of a difficult economy in which well-paid manufacturing jobs are becoming increasingly hard to find, rising costs for everything from food to fuel, and a housing market that has still not yet hit bottom in terms of devaluation is making workers reluctant to give up their jobs, despite the increasing size of the buyout offers. However, whereas this has caused Ford to start targeting plants on an individual basis to try to shrink its blue-collar roster, GM is still going for the blanket approach. Whether or not this will change given the new target to reduce the headcount by another 10,000 personnel remains to be seen. What GM is evidently not doing (yet) is shrinking its white-collar headcount, in direct contrast to Ford. Earlier this week, it became known that Ford is looking to reduce its salaried staff by 10-12% through involuntary separations. But GM is in a different position to Ford with regards its white-collar staff. It has been busy hiring engineers specifically for a number of areas such as alternative powertrains and hybrid technologies, areas that will help the company speed new, more fuel-efficient products to market. As a result, it has been able to promise dates for its next generation of hybrids and plug-in hybrids, and undertake massive (and expensive) development programmes. But for both companies, and indeed for the entire U.S. market, the most alarming development in 2008 is the speed at which truck sales seem to be collapsing. Reports have suggested that the pick-up segment’s share of retail sales in the United States fell from 11% in April 2008 to just 9% in the first two weeks of May, a slide that has hurt GM just as much as Ford. GM is perhaps better prepared than Ford to weather this downturn, however, being further along in its restructuring plan and having a more popular line-up of small cars and larger crossover utility vehicles (CUVs). Still, with sales of high-margin vehicles tumbling at an alarming rate, none of the “Detroit Three” looks likely to return to profitability this year.
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