Transcripts

News of Layoffs Shift GM's Stock in the Right Direction

PAUL KANGAS: Another turnaround effort is under way at General Motors. The company announced its latest plan today which includes more layoffs and the possible sale of assets. As Diane Eastabrook reports, GM says a lousy outlook for U.S. sales prompted today's aggressive move.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: General Motors says it needs to raise at least $15 billion over the next year-and-a-half to survive and become more competitive in the future. To do this, the automaker plans to save $10 billion by cutting plant capacity, sales and marketing spending, salaried positions, and suspending dividends on its common stock. The company also hopes to raise between $4 billion and $7 billion by selling assets and accessing capital markets. Still, GM Chairman and CEO Richard Wagoner doesn't rule out more cost-cutting down the road.

RICHARD WAGONER, CHAIRMAN & CEO, GENERAL MOTORS: Certainly we would hope that today's actions are going to be sufficient to get us through the down cycle that we are in, but at this point no guarantees on what is going to happen to the U.S. economy and oil prices.

EASTABROOK: While Wagoner didn't announce the sale of any specific assets, he did say the sale of the Hummer brand is being considered. Global Insight auto analyst Rebecca Lindland thinks sales of other brands at this point would be too expensive in part because of dealership obligations. But she thinks GM will cut costs in other ways.

REBECCA LINDLAND, AUTO ANALYST, GLOBAL INSIGHT: So instead, they have to do the channel marketing that they are looking at doing. They are looking at combining some of the dealerships. They are looking at cutting marketing costs. And they are really just looking at what can they do internally because some of the external obligations they have prevent them from canceling brands.

EASTABROOK: GM estimates that the entire auto industry will sell about 14 million units in the U.S. this year and next due in large part to skyrocketing fuel prices. The industry sold about 16 million vehicles last year. GM President and Chief Operating Officer Fritz Henderson says the company is positioning itself for that market reality.

FRITZ HENDERSON, PRESIDENT & COO, GENERAL MOTORS: With the changes that we've seen in full size pickups and full size utilities, we've retimed or in fact postponed or in some cases even eliminated certain programs in that area which has allowed us to free up capital and engineering to deploy and to fully support passenger cars and crossover vehicles.

EASTABROOK: GN thinks by late next year, U.S. vehicle sales will rebound. The auto company thinks the steps it announced today will assure that it will be stronger and leaner by then. Diane Eastabrook NIGHTLY BUSINESS REPORT, Chicago.