Report: Struggling GM seeking deep cuts in white-collar ranks
Monday, March 21st 2005, 9:59 am
By: News On 6
NEW YORK (AP) _ General Motors Corp., which rocked investors last week by slashing its 2005 income outlook, plans deep cuts to its nonunion employee ranks, according to a newspaper report.
The automaker could cut as much as 28 percent, in certain areas, from its 38,000 U.S. white collar workers, The Wall Street Journal reported Monday, citing ``industry officials and analysts.'' The cuts are seen as the beginning of GM's effort to restructure structural problems in its core auto business after several years of avoiding large job cuts, the newspaper reported.
GM spokeswoman Toni Simonetti told The Associated Press Sunday that the company planned to continue reducing its work force through early-retirement offers and ``natural attrition.''
The Journal said GM began offering buyouts to white-collar workers earlier this month, with thousands of workers likely to accept the packages this week.
``There are no layoffs (planned),'' Simonetti said. ``There's no broad-based reduction. These are targeted reductions in areas of the business where we have determined there is a need for reductions. It's going to be determined department by department, function by function, as we look at the resources we're deploying and the resources we need.''
On Wednesday, Detroit-based GM said its income for 2005 would be only $1 to $2 per share, far below the $4 to $5 the company had predicted earlier this year. GM also said it expects a $1.50-per-share loss in the first quarter. Cash flow for the year, once expected to be a positive $2 billion, is expected to be negative $2 billion.
The company also has told salaried U.S. employees they will not receive merit pay raises this year.
GM shares plunged 14 percent on Wednesday, and fell again on Thursday. The stock rose 27 cents Friday, ending the week at $28.62, near the 52-week low.
Analysts have long expected that GM would be forced to seek major concessions from the United Auto Workers on issues as fundamental as head count, capacity and benefits. For example, GM's unionized workers currently pay nothing for health insurance.
After GM lowered its guidance, Standard & Poor's said it was revising its ratings outlook for the automaker to negative from stable, reflecting concerns about the company's profit potential. S&P's decision could foreshadow a downgrade of its rating on GM debt to junk status, which would significantly increase GM's borrowing costs.