GM Ax to Fall on US Plants, 25,000 Heads to Roll

08 June 2005

In the wake of General Motor's sales slump [WAMN: 03-Jun-05] the globe's largest carmaker has unveiled draconian plans to close yet more North American plants and shed a minimum of 25,000 jobs over the next three years.

Chairman/ceo Rick Wagoner broke the grim news to the company's annual meeting on Tuesday, at the same time warning the United Auto Workers union that GM might act unilaterally on the issue of its massive healthcare costs.

"The health care crisis is putting our future at stake", Wagoner told the hushed meeting of stockholders. "It is crystal clear that we need to achieve a significant reduction in our health care cost disadvantage, and to do so promptly. We are committed to do that.""

GM, Wagoner said, preferred cooperation to conflict with the UAW but despite ongoing negotiations the two sides have yet to reach agreement. Cautioned Wagoner: "I'm not 100 per cent certain that we will."

General Motors' North American operations have been haemorrhaging market share to overseas rivals for several years, although it was not until last month that the company announced plans to rationalize and improve its product range [WAMN: 23-May-05].

The auto titan also lost $1.3 billion (€1.06bn; £709.61m) in Q1, and it projects a hefty cash drain for 2005 as a whole. The pretax cost of post-retirement benefits, including healthcare, is expected to grow by almost twenty-five percent this year to $5.7bn.

Some observers applaud Wagoner's tough line with the UAW and the shedding of jobs. Others ask if a similarly rigorous stance towards the occupants of GM's boardroom might not be equally appropriate.

Data sourced from Financial Times Online; additional content by WARC staff