By Jennifer Yousfi
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."
News and Related Story Links:
- General Motors Corp. News Release:
GM to Bolster Liquidity by $15 Billion through 2009
- The Washington Post:
GM to Cut Salaried Workers, Production, Dividend
- The Financial Times:
GM suspends dividend and eyes asset sales
- Money Morning:
GM Tries to Reverse Course, but Can it Catch Toyota?