GM: reality bites

Newswheel staff :: 22 November 2005 :: Filed under GM, US

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Desperate times call for desperate measures

GM yesterday announced a wide ranging package of measures designed to turn the ailing giant around. The headline statistics are the culling of 30,000 jobs and 12 factories in North America. In total, GM hopes this will help save the firm around $7 billion.

The move is part of a larger strategy as detailed by US website Autoblog:

• Structural cost reductions - the end result of the job cuts and plant closures will be a reduction in capacity to 4.2 million units per year, 30 percent less than 2002 levels.
• Health-care cost reductions - this is the agreement cut with the UAW in October.
• Product Renaissance - GM plans to average 15 new models a year “for the foreseeable future.” The plan includes heavy emphasis on high-growth segments, which GM identifies as crossovers, compact and luxury SUVs, large pickups and entry luxury cars. Also expect hybrid cars, trucks and SUVs.
• Sales and Marketing - Apparently this will include a shift in emphasis from “the deal” to vehicle value and benefits, and a gradual trend to make the MSRP “more closely match actual transaction prices.”

Predictably, the United Auto Workers Union isn’t best pleased with the plan and has vowed to hold GM to its word over labour contracts which expire in 2007. “The UAW-represented workers impacted by today’s action are protected by our job security program as well as other provisions and protections of the UAW-GM National Agreement,” a union spokesman said.

Of course, GM has lost a mind-boggling $4 billion and seen its share price tumble by 40 per cent so far in 2005. So, we’re not sure exactly what the unions expected the company’s management to do. That said, it is surprising to see GM’s Oshawa, Ontario plant among the list of closures: it’s thought to be one of the company’s most productive facilities. And lest ye forget, GM retains a cash resevoir of around $19 billion dollars. Regardless of how effective these measures are, therefore, GM has the funds to continue driving itself into the ground for several years to come.

Linkage:
Autoblog