General Motors slashes jobs, calls for talks with union

Labor unions are facing tough times after world number one automaker General Motors announced it is to cut 25,000 jobs and called on the unions to negotiate on some top priority issues or put the group's very survival at risk.

Chairman and chief executive Rick Wagoner, who made the announcement Tuesday at GM's annual shareholder meeting, said the overhaul will mean the closure of assembly and component plants in an effort to reach annual savings of about US$2.5 billion.

The staff cuts will be the largest since GM took 74,000 workers off its payroll in 1991.

And Wagoner urged the union to negotiate, particularly on health insurance.

Wagoner said the move is aimed at reversing the "poor performance" for the North American division of the auto group which lost US$1.3 billion in the first quarter of this year.

One focus will also be on surging US health care costs, which have been a highly publicized drag on GM's earnings.

"Our 1,500-dollar-per-unit health care expense represents a significant disadvantage versus our foreign-based competitors," Wagoner said.

The chief executive said GM would continue talks with the United Auto Workers in an effort to "reduce our health care cost disadvantage" against other global automakers.

This year, GM envisages US$5.6 billion in health care costs versus US$5.2 billion last year. Meanwhile, the company had US$1.1 billion in first quarter losses.

The automaker now needs to get a grip on its problems, and more precisely to persuade unions to accept cuts in the generous insurance provisions for salaried workers.

At General Motors, a union member employee will pay seven percent of his own medical costs, compared with 27 percent for non-union workers.

"Let me just emphasize that our very strongly preferred approach is to do this in cooperation with the UAW [the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America], because we're convinced that is the best way for our employees, our stockholders, all our constituents," said Wagoner.

"I don't see any easy solution to the health care issue right now," said Efraim Levy of Standard and Poor's.

UAW vice president Richard Shoemaker said job cuts weren't the solution.

"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 US market share," he said.

"We will do all that is possible to protect the interests of our members and their families," added Shoemaker.