- The Washington Times - Wednesday, July 16, 2008

DETROIT | General Motors Corp. said Tuesday it will lay off salaried workers, cut truck production, suspend its dividend and borrow $2 billion to $3 billion to weather a severe downturn in the U.S. market.

GM said the moves will raise $15 billion to help cover losses and revitalize its North American operations, including $10 billion from internal cost-cutting and $5 billion from selling some assets and borrowing against others.

“In short, our plan is not a plan to survive. It is a plan to win,” GM Chairman and Chief Executive Officer G. Richard Wagoner Jr. said in a broadcast to employees.

GM’s shares fell as much as 6 percent to a new 54-year low of $8.81, then rebounded to close at $9.84, up 46 cents, or 4.9 percent, from Monday’s close.

Chief Operating Officer Fritz Henderson said GM wants to reduce its total salaried costs in the United States and Canada by more than 20 percent.

A large chunk of the reduction, he said, would come from cutting health care benefits for salaried retirees over age 65. Those people would get a pension increase from the company’s overfunded pension fund to help compensate for Medicare and supplemental insurance, the company said.

Several thousand jobs will be cut through normal attrition, retirements, and early retirement and buyout offers, Mr. Henderson said. The company could resort to involuntary layoffs only if necessary, he said.

Mr. Wagoner said the company has not made early retirement offers to salaried workers for three or four years, and he would expect good acceptance of new offers, helping GM reach its cost-cutting goal.

“I suspect the vast majority of the reductions will be accomplished through initiatives which do not require involuntary actions,” Mr. Wagoner said. “Let’s see how it plays out.”

GM has 40,000 salaried employees in North America.

Mr. Henderson said the company intends to reduce its truck production capacity by 300,000 units, 150,000 more than it announced at its annual meeting in June.

The company will speed previously announced closures of some truck and sport utility vehicle factories. GM said last month it would close plants in Janesville, Wis.; Oshawa, Ontario; Toluca, Mexico; and Moraine, Ohio, but Mr. Henderson would not say which closures would be accelerated or when the closures would take place.

The company also will make thousands of job cuts at other truck assembly and parts factories, Mr. Henderson said.

He would not say whether further plants will be closed, and said the company still must negotiate further cuts with the United Auto Workers.

Mr. Henderson said 19,000 hourly workers have recently left the company through an attrition program, but even more cuts will be needed.

“These are going to be some pretty tough measures,” he said.

GM said it will suspend its $1 per share annual dividend immediately, which will improve liquidity by $800 million through 2009. It’s the first time the company has suspended its dividend since 1922.

The company plans to raise $2 billion to $4 billion through the sale of assets, possibly including its Hummer brand. It also plans to borrow $2 billion to $3 billion by pledging assets, including stock of foreign subsidiaries, brands, stake in its finance arm and real estate. Mr. Wagoner said the company likely wouldn’t seek that cash until 2009.

Mr. Henderson said the company determined the credit markets are so inhospitable it would be too risky to raise cash that way, so it focused on internal cost cutting.

GM and other auto companies have been hammered by high gas prices, the weak economy and a rapid shift in consumer preference away from trucks and SUVs. GM’s sales were down 16 percent in the first six months of this year, led by a 21 percent decline in truck sales.

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