General Motors Job Cuts
July 8, 2008
AP - A person familiar with the company’s discussions said Monday all the options are being considered as General Motors tries to cope with the dramatic shift in consumer buying habits from trucks to cars and crossover vehicles.
The person asked not to be identified because no decisions have been made.
General Motors shares dropped briefly Monday afternoon to $9.92, tying their lowest point since Sept. 13, 1954, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes.
Later in the afternoon, the stock rebounded and rose 11 cents to $10.23. It has traded as high as $43.20 in the past year.
General Motors announced last month it would close four truck and sport utility vehicle plants and boost production of several existing car models. Its sales are down 16.3 percent this year.
Further job cuts could be considered by General Motors’s board of directors when it meets in early August, The Wall Street Journal reported Monday.
Company spokeswoman Renee Rashid-Merem would not comment on potential job or brand cuts, but said the company has made it clear that action would be taken if the U.S. auto market worsened.
“If conditions persist or deteriorate, then we’ll continue to take aggressive actions,” she said Monday.
General Motors’s stock price tumbled to its previous 53-year low of $9.96 on Wednesday after Merrill Lynch analyst John Murphy wrote in a note to investors that a General Motors bankruptcy “is not impossible if the market continues to deteriorate and significant incremental capital is not raised.”
The next day, JPMorgan analyst Himanshu Patel called the bankruptcy fears overblown but predicted General Motors will burn through $18 billion in 2008 and 2009 as it struggles with depressed U.S. sales.
General Motors has $24 billion in cash and $4.6 billion in credit on hand, he said, so it doesn’t need to raise more money immediately. But he predicted the automaker will try to raise another $10 billion in the third quarter of this year by mortgaging trademarks, international operations and other assets.
Critics have said General Motors still has too much fat in its middle management, despite cutting white-collar employment to 32,000 last year from 44,000 in 2000. They also say the engineering, manufacturing and marketing costs are too high for it to keep all eight of its brands.
Over the years, analysts have suggested cutting or selling the Buick, Saab or Saturn brands, perhaps jettisoning them like General Motors did with Oldsmobile in 2004. Chevrolet and Cadillac remain the company’s strongest sellers.
Buick sales are down 21 percent so far this year, while Saab is down 29 percent and Saturn sales are off nearly 19 percent. Saab, the Swedish automaker, sold only 12,068 vehicles during the first half of 2008. Saturn sales have declined nearly 19 percent for the year even though its model lineup has been completely revamped.
General Motors already has decided to study the sale of its Hummer brand. The big trucks aren’t the right product for consumers facing $4 per gallon gasoline.
Comments
Got something to say?
