- The Washington Times - Tuesday, June 7, 2005

WILMINGTON, Del. (AP) — General Motors Corp. plans to close plants and eliminate 25,000 manufacturing jobs in the United States by 2008 in an attempt to restore profitability at the world’s largest automaker, its chairman said yesterday as he fended off calls for his resignation.

Chairman and Chief Executive Rick Wagoner told shareholders at GM’s 97th annual meeting in Delaware that the capacity and job cuts should generate annual savings of roughly $2.5 billion. About one out of six GM jobs in the United States will be eliminated.

Mr. Wagoner revealed the cutbacks as he laid out a strategy to invigorate GM’s North American operations, its biggest and most troubled, amid lackluster sales of its highly profitable trucks and sport utility vehicles, which have been hurt by high fuel prices.

GM posted a $1.1 billion loss in the first quarter, and its U.S. market share has fallen to 25.4 percent from 27 percent a year ago, as customers increasingly are choosing models from Toyota Motor Corp., Nissan Motor Co. and other Asian automakers.

The cuts would be on top of earlier reductions that pared GM’s U.S. work force from 177,000 hourly and salaried employees at the end of 2000 to 150,000 at the end of last year, according to figures provided by GM.

“Let me say up front that our absolute top priority is to get our largest business unit back to profitability as soon as possible,” said Mr. Wagoner, who added that with $20 billion in cash and short-term investments, GM is in no danger of going out of business anytime soon.

“But if we don’t fundamentally get at these structural issues — whether it’s ‘gee-whiz,’ exciting products, or the right distribution, or a solid cost structure in every element of business — the risk of continually being weakened over time is real,” he said.

Mr. Wagoner wouldn’t say which plants are in danger of being closed, but David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said the most likely targets are several older plants. Those include facilities in Janesville, Wis.; Doraville, Ga.; Oklahoma City and Pontiac, Mich., he said. The Janesville plant was built in 1919 and the Doraville plant was built in 1947. The other two plants were built in the 1970s.

Mr. Cole said GM probably won’t close plants that have recently undergone costly renovations, such as the plant in Lordstown, Ohio, that recently got $1 billion worth of upgrades.

Disgruntled shareholders, who saw the value of their shares fall to a 10-year low in April, gave Mr. Wagoner an earful yesterday.

“This company is sick,” said James Dollinger, a Buick salesman from Flint, Mich., who angrily told Mr. Wagoner he should resign.

Fellow shareholder John Lauve compared the GM leadership to officers aboard the Titanic as it headed for an iceberg. “The Titanic sank because the directors ignored the warnings,” said Mr. Lauve, who criticized everything from gas gauges in GM vehicles to the company’s health care cards. “We need to excel at the basics.”

Fending off such criticism, Mr. Wagoner outlined four priorities: increasing spending on new cars and trucks; clarifying the role of each of GM’s eight brands; intensifying efforts to reduce costs and improve quality; and continuing to search for ways to reduce skyrocketing health care expenses.

He noted that health care expenses add $1,500 to the cost of each GM vehicle. That puts GM at a “significant disadvantage versus foreign-based competitors,” Mr. Wagoner said, echoing comments made by the Standard and Poor’s and Fitch ratings services after both reduced the company’s bond rating to “junk” status last month.

Mr. Wagoner described as intense the status of negotiations with the United Auto Workers (UAW) and other unions on ways to significantly reduce GM’s health care costs. GM’s health care tab for its 1.1 million current and former workers and their families is more than $5 billion per year and rising.

“We have not reached an agreement at this time, and to be honest, I’m not 100 percent that we will,” said Mr. Wagoner, the CEO since 2000 and chairman since 2003.

To date, the UAW has indicated it won’t reopen its contract, which expires in 2007, and agree to pick up a larger share of soaring health-care costs. Messages left yesterday with the UAW were not returned.

Mr. Wagoner said another part of the company’s strategy is to make GM’s eight brands more distinct from each other. Chevrolet and Cadillac will continue to have full vehicle lineups, he said, but the company’s other six brands — GMC, Pontiac, Buick, Saturn, Saab and Hummer — will be more tightly focused on niche markets.

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