The biggest US carmaker, General Motors, is implementing sweeping belt-tightening measures from the factory floor to the boardroom as it scrambles to bolster its cash position by US$15 billion to cope with plummeting car sales.
The Detroit-based manufacturer, which produces marques such as Cadillac, Chevrolet and Vauxhall, is considered by analysts to be in danger of bankruptcy as soaring petrol prices put motorists off buying its pick-up trucks and 4x4s.
GM announced yesterday that it was reducing its white-collar payroll costs by 20 percent through a two-year pay freeze and a program of voluntary redundancies.
In a radical move that risks the wrath of unions, GM is scrapping health insurance for many of its retired workers and their families from next year.
At the top of the firm, GM chief executive Rick Wagoner and his fellow executives will get no bonuses this year and maximum cash compensation will drop. Excluding share options, Wagoner received US$3.36 million last year.
Shareholders will share in the pain as GM suspends dividend payments for the first time since 1922, saving US$800 million annually.
“We can’t sit back and wait for US market conditions to improve,” Wagoner said.
On GM’s home territory, many Americans are switching to smaller, fuel-efficient cars, which tend to be a speciality of Asian motor manufacturers.
GM’s shares, which slipped by US$0.19 to US$9.21 during early trading in New York, are at their lowest level since the 1950s.
“These are tough actions, which we really don’t enjoy,” Wagoner said. “The future of the company, under these circumstances, has to be the thing we look at first and foremost.”
GM and its two Detroit rivals — Ford and Chrysler — have already cut more than 100,000 jobs since 2006.
Democratic presidential candidate Barack Obama weighed in on GM’s woes, saying restructuring by a “mainstay” of US business was a “sober reminder of the difficult economic times we’re facing and of why we need change and a new direction in Washington.”
Under GM’s plan, some US$10 billion in cash savings will come from cost reductions and the company hopes to raise between US$4 billion and US$7 billion through asset sales and refinancing actions.
Among the possible businesses on the block is Hummer, which GM put under review last month. There has been speculation that other marques suitable for possible sale include Buick and Saab.
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