GM to Close 9 Facilities and Eliminate 30,000 Jobs; Looks to Full-Size SUVs
21 November 2005
On Monday, GM Chairman and CEO Rick Wagoner announced the company’s next move to reduce its cost and stem its losses in North America: the closing of nine assembly, stamping and powertrain facilities and three Service and Parts Operations facilities, and the elimination of 30,000 jobs.
The plant closings and job reduction will reduce GM’s North American assembly capacity by about 1 million units by the end of 2008, to around 4.2 million units (two shift basis). That’s down 30% from 2002.
On Oct. 17, GM has announced an agreement with the UAW to lower its health-care costs, thereby saving about $1 billion per year.
Wagoner also said the company has further accelerated its cost-cutting efforts, raising the previously indicated $5 billion running rate cost reduction plan in North America to $6 billion by the end of 2006. In addition, GM continues to pursue its plans to target $1 billion in net material cost savings. In total, the plan is to achieve $7 billion of cost reductions on a running rate basis by the end of 2006—$1 billion above the previously indicated target.
On the revenue side, GM clearly needs to turnaround its foundering sales. As reflected in the latest November sales flash report from J. D. Power, Toyota has pushed up to within one percent of overtaking GM’s declining market share in the US.
As described by Wagoner, GM’s product plan includes a heavy emphasis on what it sees as “the products most important to the market and to us”: crossovers, compact and luxury SUVs, large pickups and SUVs and entry-level luxury cars.
GM has pulled ahead the introduction of its new line of full-size SUVs (earlier post), some of which will go on sale in January 2006.
We have a view that the next round of SUVs will be very strong for us.
GM is now targeting 15 all-new entries per year in the North American market. Details on new products will be forthcoming at the Detroit auto show in January.
According to the press release issued by GM on the plant closings, the company:
Remains committed to a diversified portfolio of hybrid cars and trucks, including hybrid versions of the Saturn VUE, Chevrolet Malibu, and the next generation of GM full-size pickups and SUVs.
Will continue to focus on the implementation of other fuel savings technologies, such as Displacement on Demand and six-speed transmissions. (Earlier post.)
Will expand its offerings of flex-fuel vehicles (E85).
However, the topic of hybrids, technologies for fuel efficiency, flex fuel, or changing market demands that might put a premium on fuel efficiency didn’t emerge once during the presentation to analysts and subsequent Q&A.
GM did note that demand for its mid-size SUVs was “soft”, but that it believed that segment would strengthen in 2006 and stabilize in 2007. Company executives reiterated the importance they place on the full-size SUV market, and their expectations that even given the weakening of that segment overall, the new GM models will help them increase their share, and provide revenue “protection”.
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