TOPICS > Economy

Automaker GM Plans to Cut 25,000 Jobs, Close More Plants

BY Admin  June 7, 2005 at 1:00 PM EDT

GM, the world’s largest automaker, is struggling to revive sluggish sales in North American and fight higher expenses, Reuters reported.

General Motors Chairman and CEO Rick Wagoner told shareholders at the company’s annual meeting the cost-cutting measures will save the company $2.5 billion a year. Following a disappointing first quarter in which GM lost $1.1 billion, the announcement sent company shares up 47 cents, or 1.6 percent, to $30.89 in early trading on the New York Stock Exchange.

Wagoner laid out four priorities: increasing spending on new cars and trucks; clarifying the role of each of GM’s eight brands; intensifying efforts to reduce costs and improve quality; and continuing to search for ways to reduce skyrocketing health care expenses, according to the Associated Press.

“Let me say up front that our absolute top priority is to get our largest business unit back to profitability as soon as possible,” he said.

Health-care expenses add $1,500 to the cost of each GM vehicle, which puts the auto giant at a “significant disadvantage versus foreign-based competitors,” said Wagoner.

Company management is already in negotiations with employee unions to reduce health-care costs, he said, but added that it was not certain if an agreement would be reached, according to Reuters.

GM’s health care costs for its 1.1 million current and former workers and their families is more than $5 billion a year and rising. GM currently employs 110,000 hourly workers in the United States.

Over the past four years, GM has closed a number of plants, reducing annual assembly capacity from 6 million vehicles in 2002 to a projected 5 million in 2005, according to the AP. In 2005, GM closed a factory in Linden, N.J. in April and one in Baltimore in May, which displaced approximately 2,000 employees. Last month, the company also closed two plants in Lansing, Mich.

An annual report released last week on North American manufacturing operations ranked GM last in leading automakers for its assembly plant capacity utilization rates. The report said in 2004, GM used 85 percent of its North American plant capacity, compared with a rate of 107 percent at Toyota Motor Corp., AP reported.