GENERAL MOTORS yesterday announced a plan to cut costs by $10 billion (€6.27 billion), suspend its common stock dividend and sell up to $4 billion (€2.50 billion) in assets in a bid to shore up cash to survive a deep industry slump.
The restructuring, the second in the past six weeks, is driven by high fuel prices, a shift away from trucks and SUVs, and the weakest US industry-wide auto sales in a decade.
The car giant said it would cut white-collar employment costs by 20 per cent, a step expected to mean the loss of thousands of jobs among the 40,000 salaried workers GM employs in North America.
Analysts said GM's plan addressed some of Wall Street's concerns about the pressure on the company's $24 billion (€15 billion) in cash, but cautioned that a full turnaround still hinged on a recovery in the US market.
"For now, this solves GM's liquidity issues, but we have to see better demand for automobiles, for cars and trucks in order for the liquidity crisis to be put to bed," said Tim Ghriskey, chief investment officer at Solaris Asset Management, in New York.
"They're burning through about $3 billion (€1.88 billion) in cash a quarter. The cash drain has to stop at some point or GM has larger problems."
GM said it expects to generate $10 billion (€6.27 billion) in cash savings from operations through 2009. It said it could capture those savings through cutting white-collar jobs and some retiree healthcare coverage, eliminating executive bonuses for 2008, reducing capital spending by $1.5 billion (€940 million), and accelerating truck plant closures announced last month.
- Reuters