Job Cuts at GM Expected Today
General Motors Corp. is expected to start cutting thousands of U.S. salaried workers today as part of a sweeping restructuring aimed at stemming losses and market share, a person close to the situation said Monday.
Today’s cuts will be in the engineering division, the person said. He also said reductions in sales and marketing staff would be announced in April.
The job cuts will be the first of those announced in November, when the struggling automaker said it would let go 7% of its 36,000 white-collar U.S. employees this year.
A GM spokesman declined to comment.
The world’s largest automaker lost $10.6 billion in 2005 as it faced high labor and commodities costs, loss of U.S. market share to foreign rivals and sluggish sales of sport utility vehicles -- typically its largest profit generators.
The staff cut “sends a message to the union that everyone is sharing the pain,” Argus Research analyst Kevin Tynan said.
In November, GM reached a deal with the United Auto Workers union that would slash its healthcare costs by $1 billion a year. The automaker in January halved its dividend, cutting it for the first time in more than 13 years and said it would reduce top executive pay by 30%.
GM last week reached a deal with the UAW to offer more than 100,000 early-retirement packages to hourly workers as part of a plan to lop off 30,000 jobs and close 12 plants through 2008.
The atmosphere at GM’s Warren Technical Center in Michigan was tense Monday, as engineers remained unsure of their future, the person said.
“Fundamentally speaking, GM has enough capacity to service one-third of the American vehicle business, but they only have about a quarter of it right now,” Burnham Securities analyst David Healy said. “GM has too many plants, too many people and too many models.”
Separately, GM said Monday it expected its U.S. market share to continue to fall in the first quarter of this year because of aggressive competition, but said it wouldn’t reverse its strategy of lowering prices and relying less heavily on discounts.
“We’re certainly not pleased with current share levels and we’re not satisfied with it, but we have to run this play,” said Paul Ballew, GM’s executive director of market and industry analysis.
GM’s U.S. market share -- which is crucial to the company’s North American turnaround -- will be about 24% in March, down from 27% a year earlier, he said.
GM shares rose 28 cents Monday to $22.93.
