General Motors has announced a plan to slash costs by R16,5 billion per annum by closing US assembly and component plants and cutting 25 000 manufacturing jobs by 2008.

General Motors has announced a plan to slash costs by R16,5 billion per annum by closing US assembly and component plants and cutting 25 000 manufacturing jobs by 2008.


GM, the world’s largest automotive manufacturer, lost R6,6 billion in the first quarter and is facing its worst financial crisis in more than a decade. The General has been closing plants over the past four years and will have reduced its annual North American assembly capacity from six million vehicles in 2002 to five million by the end of this year, a report said on Wednesday.


A benchmark annual report on North American manufacturing operations released last week reportedly ranked GM last among leading vehicle makers in the use of assembly plant capacity.


Addressing the media yesterday, GM chairman and chief executive Rick Wagoner said “at least” 25 000 American jobs would be cut in the 2005-08 period. It was suggested that imminent plant closures and job cuts would form part of an aggressive strategy to turn around an icon of industrial America.


However, US automotive analyst Michael Bruynesteyn (Prudential Equity Group) said the elimination of 25 000 or more hourly jobs to end-2008 would be in line with the normal five per cent annual retirement or attrition rate at GM. Its hourly US work force was 111 000 at the end of last year.


Meanwhile, Michael Bee, lead equity strategist at Boyd Watterson Asset Management, said US manufacturers would continue to ship jobs overseas.


“The cost of a GM worker in China is about 10 per cent the cost of a US worker…. You really just can’t compete with some of these foreign producers,” Bee said.


Wagoner said GM had been in discussions with the United Auto Workers (UAW) union about ways to reduce the company’s massive health-care costs.


But Bruynesteyn was quoted as saying that no significant changes on health care were likely before GM’s current contract with the UAW expires in September 2007.


GM expects to spend a whopping R37 billion on employee and retiree health care this year. The company’s executives argue that hourly union workers should pay the same out-of-pocket medical expenses as the company’s white-collar, salaried workers. That would save GM as much as R6,6 billion a year.


Wagoner said: “Health-care expenses represent a significant disadvantage versus foreign-based competitors. Left unaddressed, this will make a big difference in our ability to compete in investment, technology and other key contributors to our future success.”

Original article from Car