By Michelle Krebs
DETROIT -- General Motors will eliminate 10,000 jobs from its global salaried ranks, with more than a third of those being in the United States. Remaining salaried workers in the States will see their pay cut temporarily, beginning May 1.
"These difficult actions are necessitated by a severe drop in vehicle sales worldwide and by the need to restructure GM for long-term viability," GM said in its statement issued Tuesday morning.
Job Cuts: Numbers Vary By Region
GM's latest round of job cuts as well as the pay reductions had been anticipated, but the job cuts were deeper than some analysts predicted. The job cuts amount to a 14-percent reduction of GM's salaried workforce. The automaker's global salaried employment will drop to 63,000 people from the current 73,000 this year, the company said.
Not surprisingly, the biggest chunk of job cuts will occur in the U.S., where industry and GM vehicle sales continue to plummet to record lows. GM will eliminate 3,400 -- or 12 percent -- of its 29,500 salaried positions in the U.S.
U.S. vehicle sales in January fell 37 percent to a 27-year low and an annualized rate of under 10 million vehicles. GM sales, which fell 11 percent from 2007 to 2008, dropped 49 percent in January, more than the total industry. For 2009, GM is conservatively forecasting industry sales of 10.5 million vehicles, compared with 13.2 million last year and an average of 16 million this decade.
GM said the U.S. employment reductions will be made using separation programs and policies, which provide for severance payments, benefit contributions and outplacement assistance. The majority of the reductions are expected to take place by May 1, GM said
Job cuts outside the U.S. will vary depending on the staffing levels in the region and market conditions. GM provided no specifics, saying details of the reductions and separation programs will be shared directly by regional leadership with the affected employees.
Increasingly, GM is relying on sales outside of the U.S. In 2008, 64 percent of GM's sales were outside the U.S., especially emerging markets like China, Brazil, India and Russia. That was up from 59 percent in 2007. Even so, GM's forecast calls for global sales to fall to 57.5 million vehicles from last year's 67.1 million last year, a 10-percent decline.
Pay Cuts: Range from 3 to 10 Percent
GM also announced a temporary pay reduction for a majority of U.S. salaried employees. The cuts begin May 1 and are effective through year-end, when they will be reviewed. In the U.S., executive employees will have their base pay reduced by 10 percent, and many other salaried employees will see reductions of 3 to 7 percent.
Other countries are currently reviewing compensation and benefits for salaried employees, GM said.
High-Profile Departures
In recent days, GM has announced the departures of a couple of high-profile executives.
Most notably, GM said Monday that the legendary Bob Lutz, vice chairman of global product development, will step down from day-to-day duties April 1 and become a senior advisor until he retires at year-end.
GM's second-in-command public relations exec, Tony Cervone, who was heir apparent to the top PR job, left the automaker to head communications at United Airlines.
Feb. 17 Deadline Looms
GM noted that it had outlined the need for the reductions in its restructuring plan submitted to Congress on Dec. 2, 2008. "The announcement this week begins implementation of this aspect of the plan," its statement said.
A flurry of activity is expected this week as GM puts the finishing touches on its progress on its viability plan that must be submitted to the U.S. government Feb. 17 in order to keep the $13.4 billion in federal loans it already has received and to obtain future funding. Another progress report is due March 31.
Already, GM has started offering buyouts to 62,000 union workers. Word is GM is specifically targeting more than 10,000 of those workers, many who are retirement eligible, and hopes half will accept the offers. Under GM's 2007 contract with the United Auto Workers union, new hourly employees can be hired in at lesser pay, about $14 an hour or about half of what workers now make.
In addition to the buyout offers, GM is talking with its unions about other cost-reduction issues.
Across the Atlantic, GM and the Swedish government are in talks as to what to do with Saab. The two parties are negotiating a way Saab can be re-established as an independent entity with financial help from the Swedish government.
GM is expected to decide the fate of its ailing Hummer brand by the end of the first quarter. GM has put it on the auction block and claims it has received considerable interest from prospective buyers. However, GM could opt to keep it and change it or kill it altogether.
GM also is contemplating the future of its Saturn division. GM executives and Saturn dealers met last week to consider a host of options that GM marketing chief Mark LaNeve described to Automotive News as "everything from a new dualing pattern to a spinoff to a partnership to an outright sale." LaNeve told the trade journal the list of options would be narrowed and presented to Saturn dealers this week. Dealers said the final decision on Saturn's fate could be disclosed within hours of GM filing its viability plan on Feb. 17.
GM said in December it will focus on its core brands -- Chevrolet, Cadillac, Buick and GMC. It already has said it will drastically reduce its Pontiac lineup so that it becomes a niche brand.
On the supply side, GM is negotiating with bankrupt Delphi Corp., a company created from GM's far-flung parts operations in1999, to take back some of Delphi's plants. GM wants to make sure it continues to receive a stream of parts from its largest supplier. For Delphi, pawning some of those plants onto GM may help it attract financing so it can emerge from Chapter 11, where it has been mired since October 2005.
Bankruptcy Still An Option
And still, GM could face bankruptcy, likely a pre-packaged one. The U.S. government, which has hired expert advisors on bankruptcy, could force GM as well as Chrysler into bankruptcy in order to put U.S. taxpayers ahead of other creditors for being re-paid loans.
GM insists as it has all along that bankruptcy is not an option and would be sure death as consumers would not buy vehicles from a company in bankruptcy.
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