Pure_Evil
06-07-2005, 05:08 PM
General Motors Corp. (NYSE:GM - news) expects to close more U.S. assembly and component plants over the next few years, slashing about 25,000 manufacturing jobs, as it battles high costs and shrinking market share, the company's chief executive said on Tuesday.
Chairman and CEO Rick Wagoner, speaking at the annual meeting, also said GM expects to save $2.5 billion a year from the cost-cutting measures.
Investors welcomed the news, sending GM shares up 2 percent. Michael Bee, lead equity strategist at Boyd Watterson Asset Management LLC, said U.S. automakers will continue to ship jobs overseas.
"The cost of a GM worker in China is about 10 percent the cost of a U.S. worker ... You just really can't compete with some of these foreign producers," Bee said.
GM, the world's largest automaker, lost $1.1 billion in the first quarter and is riding out its worst financial crisis in more than a decade. It has been closing and idling plants over the past four years and will have cut its annual North American assembly capacity from six million vehicles in 2002 to five million by the end of this year.
A benchmark annual report on North American manufacturing operations released last week ranked GM last among leading automakers in assembly plant capacity utilization rate.
The report, prepared by Harbour Consulting of Troy, Michigan, said GM used 85 percent of its North American plant capacity in 2004, compared with 107 percent at Toyota Motor Corp. (7203.T).
Wagoner said at least 25,000 U.S. jobs would likely be cut in the period 2005-2008. His warning of plant closings and job cuts seemed to suggest an aggressive strategy for turning around an icon of industrial America.
But analyst Michael Bruynesteyn of Prudential Equity Group said eliminating 25,000 or more hourly jobs through 2008 would be in line with the normal 5 percent annual retirement or attrition rate at GM.
The company's hourly U.S. work force stood at 111,000 at the end of 2004.
Wagoner said GM had been in intense discussions with the United Auto Workers union about ways to reduce the company's massive health-care costs. He said it was not certain whether an agreement would be reached.
Bruynesteyn said no significant changes on health care were likely before GM's current contract with the UAW expires in September 2007.
GM expects to spend $5.6 billion on employee and retiree health care this year, and cited that burden when it recently withdrew its earnings guidance for 2005.
GM executives have argued 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 $1 billion a year, including the cost of medical care for hourly retirees, according to Sean McAlinden, an economist at the Center for Automotive Research in Ann Arbor, Michigan.
Wagoner said, "Our $1,500 per (vehicle) health-care expense represents a significant disadvantage versus our 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."
GM shares were up 58 cents at $31 in late-morning trade on the New York Stock Exchange.
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Chairman and CEO Rick Wagoner, speaking at the annual meeting, also said GM expects to save $2.5 billion a year from the cost-cutting measures.
Investors welcomed the news, sending GM shares up 2 percent. Michael Bee, lead equity strategist at Boyd Watterson Asset Management LLC, said U.S. automakers will continue to ship jobs overseas.
"The cost of a GM worker in China is about 10 percent the cost of a U.S. worker ... You just really can't compete with some of these foreign producers," Bee said.
GM, the world's largest automaker, lost $1.1 billion in the first quarter and is riding out its worst financial crisis in more than a decade. It has been closing and idling plants over the past four years and will have cut its annual North American assembly capacity from six million vehicles in 2002 to five million by the end of this year.
A benchmark annual report on North American manufacturing operations released last week ranked GM last among leading automakers in assembly plant capacity utilization rate.
The report, prepared by Harbour Consulting of Troy, Michigan, said GM used 85 percent of its North American plant capacity in 2004, compared with 107 percent at Toyota Motor Corp. (7203.T).
Wagoner said at least 25,000 U.S. jobs would likely be cut in the period 2005-2008. His warning of plant closings and job cuts seemed to suggest an aggressive strategy for turning around an icon of industrial America.
But analyst Michael Bruynesteyn of Prudential Equity Group said eliminating 25,000 or more hourly jobs through 2008 would be in line with the normal 5 percent annual retirement or attrition rate at GM.
The company's hourly U.S. work force stood at 111,000 at the end of 2004.
Wagoner said GM had been in intense discussions with the United Auto Workers union about ways to reduce the company's massive health-care costs. He said it was not certain whether an agreement would be reached.
Bruynesteyn said no significant changes on health care were likely before GM's current contract with the UAW expires in September 2007.
GM expects to spend $5.6 billion on employee and retiree health care this year, and cited that burden when it recently withdrew its earnings guidance for 2005.
GM executives have argued 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 $1 billion a year, including the cost of medical care for hourly retirees, according to Sean McAlinden, an economist at the Center for Automotive Research in Ann Arbor, Michigan.
Wagoner said, "Our $1,500 per (vehicle) health-care expense represents a significant disadvantage versus our 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."
GM shares were up 58 cents at $31 in late-morning trade on the New York Stock Exchange.
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