Nov. 21 (Bloomberg) -- General Motors Corp., weighed down by its biggest losses in more than a decade, will close 12 North American operations and purge 30,000 jobs in its deepest round of cuts since 1991.
Chief Executive Rick Wagoner said today he will idle five auto plants, four parts factories and three non-manufacturing complexes. Among them is a Saturn plant opened 15 years ago as an answer to the small-car threat from Asia. The moves will lower GM's $41 billion annual operations expenses by $7 billion by the end of next year, Wagoner said.
``This is the bad medicine they need to swallow to get back to some form of profitability,'' said Rebecca Lindland, senior analyst with Global Insight Inc. in Lexington, Massachusetts. ``If they can combine these actions with some concessions on the health-care side, and some really exciting products, it definitely sets them on the right path.''
The job cuts are 20 percent greater than what Wagoner promised in June. Since then, GM's North American losses have ballooned to $4.8 billion for the first three quarters. Competition from rivals such as Toyota Motor Corp. has pushed the automaker's U.S. market share to 80-year lows. Ratings companies responded by reducing the automaker's debt to junk.
Plant Closings
In addition to one of the Saturn plants in Spring Hill, Tennessee, GM will close assembly plants in Doraville, Georgia; Lansing, Michigan; Oklahoma City; and Oshawa, Ontario. The automaker will shut down engine plants in St. Catharines, Ontario, and Flint, Michigan. GM will also reduce shifts at assembly plants in Moraine, Ohio, and a second car plant in Oshawa.
Oklahoma City and Moraine make mid-size sport-utility vehicles, whose falling sales have contributed to GM's losses this year.
The majority of the closings and shift reductions will be complete by next year. The Georgia and Oshawa closings will come by the end of 2008. Today's announcement was the biggest since Dec. 18, 1991, when GM said it intended to close 21 assembly and manufacturing operations and eliminate 74,000 jobs.
The closings will reduce GM's North America assembly capacity to about 4.2 million cars and trucks by the end of 2008, a 30 percent or 2 million-unit reduction since 2002. GM will have flexibility to add production if there is market demand, Wagoner said.
``As they lose sales and market share, they have to find a way to reduce their overhead cost structure,'' said Erich Merkle, director of forecasting at the consulting group IRN Inc. in Grand Rapids, Michigan.
GM shares, which on Nov. 17 touched their lowest level since 1987, have fallen 41 percent this year through Nov. 18. That is the most of any company in the Dow Jones Industrial Average as investors waited for Wagoner's job-cut plans. GM shares dropped 47 cents to $23.58 at 4:16 p.m. in New York Stock Exchange composite trading.
Swaps
The cost to insure GM debt against default fell as Wagoner's announcement eased concern the world's biggest carmaker will declare bankruptcy.
Traders last week demanded upfront payments of more than $2 million plus $500,000 a year to insure $10 million of GM debt for five years with credit-default swaps. The premium fell to about $1 million a year without upfront payments today, according to Deutsche Bank AG and ABN Amro NV prices.
Investors use credit-default swaps to bet on a company's creditworthiness or protect against non-payment. A buyer typically pays an annual fee and gets the full amount insured if the borrower defaults. In return, the swap seller gets the defaulted loans or bonds. Swap prices typically decline when creditworthiness improves, and rise when it worsens.
Bonds
GM's 8.375 percent bond due in 2033 rose 2 cents on the dollar to 73 cents today in New York, according to Trace, the bond-price reporting system of the NASD. The yield fell to 11.7 percent. The bond reached 75.5 cents earlier.
The debt dropped to a record low of 67 cents on Nov. 15, a week after GM said Nov. 9 that 2001 profit was overstated by $300 million to $400 million. The bond hasn't closed as high as 75 cents since Oct. 27, according to Trace data.
The extra yield, or spread, investors demand to own the debt rather than Treasuries narrowed 31 basis points to about 700 basis points, according to Trace. A basis point is 0.01 percentage point. The bond was the most widely traded company bond in transactions of $1 million or more, Trace data showed.
Full Story
GM cutting 30,000 jobs and closing 12 auto plants
Moderator: Super Moderators
The Amerikan people have brought this state of events upon themselves. For decades, the decent and the respectable members of the mainstream bourgeois grovelled shamelessly before their "betters"' and turned their faces away as their "inferiors" were flung into the street. They did not lift a single finger in the voting booth to choose a more equitable and stable society, where every member of the nation could share in the nation's bounty. They abandoned the Common Wealth, and now the Common Wealth abandons them.
The wages of sin is death. What goes around comes around. Hence the liquidation of the Amerikan middle class in the Age of Bush.
And while I am on a roll here... Why are you, my fellow progressives, spending paragraph after paragraph after paragraph on the reality of today without coming to the point? As you know very well, I myself am capable of writing for pages. But as I hope that you have also noticed, my posts since the Election of 2004 have been quite terse. Why? Because the situation before us is clear, nakedly and shamelessly clear. Why, my fellow progressives, are you not as terse in your posts as I am now? Could it be that you do not want to focus the lens clearly so as to see the situation whole and in sharp detail?
Note Added Five Minutes Later on Second Thought:
My fellow progressives, please forgive the waspishness of my temper this evening. It's just that, for political AND personal reasons, I am in a VERY black mood. Forgive me waspishness, my fellow progressive brothers and sisters, but also stiffen your spines a little and sharpen your focus and get a little of what Friedrich Nietzsche and Joseph Campbell both called "fatal courage"....
The wages of sin is death. What goes around comes around. Hence the liquidation of the Amerikan middle class in the Age of Bush.
And while I am on a roll here... Why are you, my fellow progressives, spending paragraph after paragraph after paragraph on the reality of today without coming to the point? As you know very well, I myself am capable of writing for pages. But as I hope that you have also noticed, my posts since the Election of 2004 have been quite terse. Why? Because the situation before us is clear, nakedly and shamelessly clear. Why, my fellow progressives, are you not as terse in your posts as I am now? Could it be that you do not want to focus the lens clearly so as to see the situation whole and in sharp detail?
Note Added Five Minutes Later on Second Thought:
My fellow progressives, please forgive the waspishness of my temper this evening. It's just that, for political AND personal reasons, I am in a VERY black mood. Forgive me waspishness, my fellow progressive brothers and sisters, but also stiffen your spines a little and sharpen your focus and get a little of what Friedrich Nietzsche and Joseph Campbell both called "fatal courage"....
Last edited by joequinn on 11-21-2005 07:48 PM, edited 1 time in total.
"Fuggedah about it, Jake --- it's Chinatown!"
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Guest
I really hate the way everything comes down to blame on the American people Quinn And I resent it.The People had nothing to with this other than GM management Like Ford and most other American car companies have they realized to late that they need Alternative fuel vehicles and higher yield gas mileage for fueled cars. NOW the American people are paying for there arogence and Ignorance
GM is coming to an end...
Where to begin....for Decades.. American Car companies decided not to compete with foreign car companies... rather they would focus on developing new styles to package the same old garbage over and over again...
When they couldn't meet the miles per gallon standards, and the clean air standards they went to their paid for politicians in congress and got exemptions... while foreign car companies easily met those standards with no exemptions..
Then they outsourced their manufacturing plants to mexico, and spun off their parts manufacturing...
this is an industry that stopped wanting to compete decades ago, but instead used manipulation, deceit, and political coruption to keep going when they should have folded....
Ford is also a close second....
American bussness men, don't know how to compete anymore, they don't know how to think ahead, but are only interested in short term profits...their illiterate crooks...
In Asia 80% of auto company managers have science degrees, in engineering, chemistry, physics or another hard science in addition to an MBA.
America is on the verge of complete and total economic destruction that will make the great depression look like an ice cream social...
The 1%er's that are responsible for this will simply go elsewhere, while civil chaos reigns... American's will look at Asia, and Europe with envy..because of the advanced technology and the advanced society that they will possess... America will be viewed as a third world country made up of religious kooks..and Appalachians...like those they see on the Jerry Springer show...
and as the slide begins.... the Neo Cons... and Reganite's who caused this mess will continue with their psychotic delusiosn, arguing against reality.. and preventing any changes that could offer hope..... Katrina was just a preview....a rehearsal...
When they couldn't meet the miles per gallon standards, and the clean air standards they went to their paid for politicians in congress and got exemptions... while foreign car companies easily met those standards with no exemptions..
Then they outsourced their manufacturing plants to mexico, and spun off their parts manufacturing...
this is an industry that stopped wanting to compete decades ago, but instead used manipulation, deceit, and political coruption to keep going when they should have folded....
Ford is also a close second....
American bussness men, don't know how to compete anymore, they don't know how to think ahead, but are only interested in short term profits...their illiterate crooks...
In Asia 80% of auto company managers have science degrees, in engineering, chemistry, physics or another hard science in addition to an MBA.
America is on the verge of complete and total economic destruction that will make the great depression look like an ice cream social...
The 1%er's that are responsible for this will simply go elsewhere, while civil chaos reigns... American's will look at Asia, and Europe with envy..because of the advanced technology and the advanced society that they will possess... America will be viewed as a third world country made up of religious kooks..and Appalachians...like those they see on the Jerry Springer show...
and as the slide begins.... the Neo Cons... and Reganite's who caused this mess will continue with their psychotic delusiosn, arguing against reality.. and preventing any changes that could offer hope..... Katrina was just a preview....a rehearsal...