General Motors Corp. (GM) yesterday (Tuesday) announced a series of
cost-saving measures aimed at fighting waning domestic sales fueled by a weak
U.S. economy and the soaring cost of fuel.
“We are responding aggressively to the challenges of today’s U.S. auto
market,” GM Chairman and Chief Executive Officer Rick Wagoner said in a General Motors company statement announcing the
cuts.
“We will continue to take the steps necessary to align our business structure
with the lower vehicle sales volumes and shifts in sales mix,” he added, “We
remain committed to bringing to market great products that target changing
consumer preferences for more fuel-efficient vehicles.”
The struggling GM is being forced to make sweeping changes as it continues to
lose market share to its Japanese-based competitor, Toyota Motor Corp. (ADR: TM). The measures announced yesterday are the latest in a string of desperate moves by GM to try
to maintain its slim lead on Toyota, its closest global rival.
The most recent changes include eliminating an unspecified number of salaried
positions, mainly through natural attrition and offers of early retirement. GM
will also discontinue healthcare benefits for older retirees, pursue the sales
of some of its brands, and eliminate its quarterly dividend.
All told, GM predicts the measures will generate an additional $15 billion in
capital by the end of 2009.
“Today’s actions, combined with those of the past several years, position us
not only to survive this tough period in the U.S., but to come out of it as a
lean, strong and successful company,” Wagoner said.
Wall Street analysts saw bolstering GM’s capital position as a top priority,
but a full-recovery for the automotive giant is tied to the U.S. economy.
“We have to see better demand for automobiles, for cars and trucks, in order
for the liquidity crisis to be put to bed,” Tim Ghriskey, chief investment
officer at Solaris Asset Management in New York, told
Reuters. “They’re burning through about $3 billion in
cash a quarter. The cash drain has to stop at some point or GM has
larger problems.”
