Mumbai: General Motors Corporation, the world's largest automaker, is planning a major restructuring of business, including a 20 per cent reduction in salaried employees, amidst a 16 per cent fall in its US vehicle sales in the second quarter of the current year.
GM chief executive Rick Wagoner is slated to detail a major cost-cutting exercise, that will include widespread job cuts for white-collar workers, including engineers engaged in GM's next generation SUVs and pickup trucks, sources close to the development said.
GM plans to cut the number of salaried employees in the US and Canada in 2008, through normal attrition, early retirements, mutual separation programmes and other separation tools. In addition, GM will eliminate healthcare coverage for US salaried retirees over 65, effective 1 January 2009. Instead, they will be given a higher pension. There will also be no new base compensation increases for US and Canadian salaried employees for the remainder of 2008 and 2009.
For the company's top executive officers, the restructuring package represents a 75 to 84 per cent reduction in their cash compensation package.
The current restructuring, the second in over 1-1/2 months, is aimed at saving $15 billion in costs through 2009 as the besieged automaker wins back investor confidence.
GM, hit hard by the $4 gas prices, is expected to shake up its product portfolio to include a new line-up of fuel-efficient and environment-friendly vehicles.
"Today's actions, combined with those of the past several years, position us not only to survive this tough period in the US, but to come out of it as a lean, strong and successful company," Wagoner said.
GM expects its US light vehicle sales at 14 million units in 2008-2009 and a market share of approximately 21 per cent. GM said it is taking actions to further reduce structural cost, and generate cash, with the goal of maximising liquidity.
GM last month announced it would close four truck and SUV plants, including the truck plant in Oshawa, Ontario by 2010, and increase production of small cars.
GM, battling three years of losses, is also likely to eliminate dividend payments as it boosts capital.
GM's sales were down 16 per cent in the first six months of the current year, while its stock price has hit 50-year lows.
A 20 per cent reduction in cash costs for salaried workers will save $10 billion, and eliminating the 25-cent quarterly dividend will save $800 million, GM said in a statement.
The company will trim production and spending and raise $4 billion to $7 billion through asset sales and new bank loans.
``We are responding aggressively to the challenges of today's US auto market,'' Wagoner said in the statement. ``We will continue to take the steps necessary to align our business structure with the lower vehicles sales volumes and shifts in sales mix,'' he added.
GM will also sell assets to raise $2 billion to $4 billion to bring in additional liquidity and another $2 billion to $3 billion from foreign subsidiaries and sale of brands and its stake in the GMAC LLC finance unit.
Wagoner, who will brief employees about the plans, is expected to detail plans at a news conference at his Detroit headquarters.
GM, which reported its largest annual loss of $38.7 billion in 2007, after a tax accounting change, hasn't posted a profit since 2004. The carmaker's US market share hovers at the lowest level since 1925, and its stock is trading at 54-year lows.
Since Wagoner became CEO in June 2000, GM has cut its US salaried workforce to 32,000 from 44,000. On June 3, Wagoner said GM would close four truck plants by 2010 to eliminate 700,000 units of North American production capacity.
GM isn't yet considering bankruptcy and doesn't plan to eliminate too many vehicle brands or shutdown of the Hummer line of sports-utility vehicles, Wagoner said.
''The actions announced today are difficult decisions, but necessary to respond to the current auto market conditions," said Wagoner adding, "Even under conservative planning scenarios, GM is well-positioned to withstand the US market downturn and emerge a stronger company. We have a solid position in the rapidly growing emerging markets, a global operating framework that allows us to respond to changes in the US market, a commitment to technology leadership, and an ever stronger and competitive product line-up."
GM's 16 per cent US sales decline through June has exceeded the industry's 10 per cent fall. Sales of pickups, SUVs and vans - the vehicles most affected by rising gasoline prices - are down 21 per cent. The company relies on light trucks for about 60 per cent of its US volume.
GM had about 284,000 employees around the world. With global headquarters in Detroit, GM manufactures its cars and trucks in 33 countries.
Shares of GM bounced higher by as much as 5 per cent in after-hours trade after the news. The stock has lost about 63 per cent since the start of the year.