Monday, March 21, 2005

Automaker to trim up to 2,000 workers

White-collar staff to be cut by more than 10% in some areas, GM says.

By Ed Garsten / The Detroit News

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DETROIT -- General Motors Corp. expects to reduce its white-collar work force in North America by 1,000 to 2,000 employees this year and reduce the head count in some departments by more than 10 percent, the company said Sunday.

The reductions would come as a result of voluntary early-retirement and buyout packages, but not outright layoffs.

Spokeswoman Toni Simonetti discounted a published report in the Wall Street Journal that some functions could see reductions of as much as 28 percent, saying GM had no such target for job reductions.

However, she acknowledged that employee cutbacks in some departments will "range from double digits to none."

"The level of reductions will vary on the needs of the business and acceptance of the offers," she said.

The Detroit News first reported in December that GM planned to offer buyout packages to nonunion workers in North America. The offers began going out earlier this year.

Since 2000, GM has reduced its nonunion salaried work force to about 38,000 at the end of 2004 -- including 31,000 in Michigan -- from about 44,000 at the end of 2000.

While not confirming a target for 2005, spokesman Robert Herta said "2005 will be no different" from past years when the company reduced its work force by 1,000 to 2,000 workers.

GM is seeking to cut costs as it faces vastly reduced profits this year and an expected first-quarter loss due to rising health care costs, disappointing sales and shrinking market share in North America.

Last Wednesday, the company lowered its full-year earnings guidance to $1 to $2 per share, down from $4 to $5 and said it would probably report a loss of about $850 million for the first quarter.

"Basically, they have decided they can't make money in North America, with their current cost structure, so they have to do something," said David Healy, an analyst with Burnham Securities. "People involved in this offer would conclude rightly that it's a carrot-and-stick kind of thing -- if they don't take a voluntary buyout, there might be a risk of involuntary things later on."

In the past five years, GM has used voluntary buyouts to reduce its salaried head count by as much as 10 percent.

To further cut costs and prevent a buildup of unsold vehicles on dealer lots, GM is permanently idling three plants this year in the United States.

The company also is slashing as many as 12,000 jobs in Europe as it seeks to bring that unit back into the black after five consecutive money-losing years.

"Relative to its current market share, this company has significant issues in terms of too many employees (salaried and hourly), plants, vehicle models and dealers," Stephen Girsky, analyst with Morgan Stanley said in a research note last week.

Last week, GM said it would not give merit pay raises to nonunion workers in North America. It also said it's reducing its matching payments to employee retirement programs from 50 cents on the dollar, to 20 cents on the dollar.

Nonunion workers also were given the opportunity to purchase three additional days of vacation for $175 a day, which allows GM to reduce payroll costs.

Falling U.S. car and truck sales prompted the automaker to deepen cuts in both first-quarter and second-quarter production by 10 percent or more.

GM, which controlled more than half of the U.S. market in 1962, may finish the year with less than 25 percent of the market for the first time since 1925.

Shares of GM rose 27 cents to $28.62 on Friday. The stock is down 29 percent year-to-date.

You can reach Ed Garsten at (313) 223-3217 or egarsten@detnews.com.