GM's new job cuts echo recent trend

WILMINGTON, Del. — General Motors' announcement yesterday that it plans to shed 25,000 U.S. manufacturing jobs sounds daunting, but the reductions are actually comparable to the slow-but-steady erosion of GM's work force of the past several years.

GM Chief Executive Officer Rick Wagoner told angry shareholders the struggling automaker will eliminate about one in five of its plant-floor workers by the end of 2008 through some plants closing, traditional attrition and early retirements.

It's not surprising GM will look to close more plants, again because the automaker has done so the past few years. Any plant closing likely won't happen until after the current United Auto Workers national agreement expires in September 2007.

Wagoner's announcement, coming at a meeting where some shareholders asked for his resignation, was seen by Wall Street as mostly an acknowledgement the automaker will continue to shrink, much as it has for more than a decade.

Some of Wagoner's comments also seemed to be aimed at the UAW — and telling them a plan to reduce GM's health-care costs needs to be worked out, either with the union or without it.

Wagoner said GM has quietly held "intense discussions" with the UAW and its other unions regarding efforts to cut GM's skyrocketing health-care tab, which is about $5.6 billion this year, not counting set-asides for the future, or roughly $1,500 for every car and truck GM sells.

Despite these high-level talks on health care, "We have not reached an agreement at this time, and, to be honest, I'm not 100 percent certain that we will, but all parties are working on it," said Wagoner at GM's 97th annual shareholders meeting in Delaware.

"What happens if we can't reach an agreement with the UAW on this matter promptly? Well, I don't believe that it serves a useful purpose to speculate on that. Let me just emphasize that our very strongly preferred approach is to do this in cooperation with the UAW," he said.

The union has resisted reopening its contract with GM.

In a statement sent to reporters, UAW Vice President Richard Shoemaker expressed skepticism about the cost-cutting plan.

"The UAW is not convinced that GM can simply shrink its way out of its current problems. What's needed is an intense focus on rebuilding GM's U.S. market share, and the way to get there is by offering the right product mix of vehicles with world-class design and quality," Shoemaker said.

Wall Street auto analysts said Wagoner's announcement of plant closings and layoffs was not surprising. GM shares finished up 31 cents, or 1.1 percent, to close at $30.70.

"This amounts to little more than past 5 percent annual attrition levels, though it will enable GM to close an additional three or four plants," wrote UBS auto analyst Rob Hinchliffe in a report to investors.

Wagoner declined to say which plants might be closed, meaning thousands of workers at U.S. assembly and parts plants will spend the next few years wondering about their plant's fate. Typically assembly plants are closed when they make poor-selling vehicles or products that are also made elsewhere.

GM plants that might fit that description include Doraville, Ga., and Oklahoma City, say automotive-production experts.

The broad plan outlined by Wagoner was the most extensive GM has offered since it stunned the financial markets with a warning of a sharp first-quarter loss in March. Wagoner said these moves will save GM $2.5 billion a year.

For years, GM propped up its U.S. sales with incentives, even as Asian rivals launched new models and won more market share. But the plan announced yesterday appears to be paving the way toward a smaller GM suited to the lower customer demand.

"It's not our objective for our market share to slide at all," Wagoner said. "But I think one of the potential diseases of this business, and we've had it from time to time ... is an overly sunny view of the ease of growing market share going forward."

Wagoner listed several steps GM will take to turn around its unprofitable North American auto business, including lowering the emphasis on sales incentives, speeding the launch of highly profitable vehicles such as full-size pickups and paring down its Pontiac and Buick lineups.

When asked if GM could also cut white-collar or salaried jobs, he said GM has already cut those positions by 33 percent over the past five years.

The 25,000 figure is actually not many more than the 22,000 U.S. plant-level jobs that GM shed from 2000-04, a period of relative stability at GM. Now, GM is in the midst of times that are anything but stable after suffering its worst financial loss in 13 years in the first quarter. GM has about 109,000 U.S. hourly workers, down from 133,000 at the end of 2000.