US carmaker General Motors yesterday brushed aside rumors that the company was headed for bankruptcy. The company said it planned to cut costs by up to $7bn a year with a major restructuring effort involving closure and scaling back of operations in many north American facilities and cutting 30,000 jobs.
The GM facilities slated for closure are Doraville in Georgia, Oshawa in Canada, Oklahoma City, Lansing in Michigan and Spring Hill in Tennessee. The second Oshawa facility is among those where production capacity will be reduced, including Moraine in Ohio.
Besides these, two other stamping plants, several distribution centres and two engine manufacturing plants will be closed down.
The job cuts represent about 10 percent of the company’s current staff strength. While speaking to employees, GM’s chairman and chief executive Rick Wagoner said the cuts “are an essential part of our plan to return our North American operations to profitability as soon as possible."
The company’s total north American and Canadian facilities’ output would be reduced to 4.2 million units annually (down by 800,000 units) by the year 2008. It would enable the company to achieve the $7bn a year cost savings by the end of 2006.
Most analysts agreed that the reductions were indeed necessary for the company to survive, but they added that it was not enough and the company needed to explain how it plans to stop loss of market share. In this year’s third quarter, its US market share was seen down at 26 percent from 43 percent in 1982 when it was regarded as the world’s biggest automaker. Currently, operations are also down to 85 percent of capacity.
The company suffered severe setbacks due to rising material costs, dropping demand for SUVs, and high pension and healthcare costs, in the process losing a good proportion of its market share to Asian carmakers. The other SUV maker Ford Motor Co has also been losing market share to foreign rivals.
The reductions plan is likely to give Wagoner a break from negotiations with the United Auto Workers union who threatened to “do everything in its power” to make the company fulfill its obligations.
The 30,000 job cuts will be the largest single layoff in the US after Kmart’s plans announced in 2003 to cut 37,000 jobs.
Posted
on : Wed, 23 Nov 2005 01:35 GMT | Business News
By : Anne Philips
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