GM Announces Second Round of Cost Cuts in Six Weeks as U.S. Economy Continues to Slump

By Jennifer Yousfi
Managing Editor

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:


  1. […] Source: GM Announces Second Round of Cost Cuts in Six Weeks as U.S. Economy Continues to Slump addthis_url = ''; addthis_title = 'GM+Announces+Second+Round+of+Cost+Cuts+in+Six+Weeks+as+U.S.+Economy+Continues+to+Slump'; addthis_pub = "; Liked this article from Money Morning? You can receive the same great commentary and insights directly to your email box when you claim your free subscription to the Money Morning eletter service. Simply fill in your email address below and hit 'subscribe'.Email Address:SubscribeNO-SPAM PLEDGE: We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from Money Morning with a few clicks.Related ArticlesContrarian Investing: Is it Time to Buy Ford Motor Co. (F) at the Bottom?Stagflation Tightens Its Grip on U.S. EconomyHow to Know Which Stocks to Buy at the Bottom Tags: Downturn Strategy, Gm, Jennifer Yousfi, TM […]

  2. […] meteoric rise in the price of oil has put an already heavily cost-burdened U.S. auto industry in a near-panic-mode situation, since customers have shifted away from Detroit’s line-up of trucks and sport-utility vehicles to […]