General Motors and Chrysler announced further economies yesterday as the biggest and smallest of Detroit’s three carmakers race to conserve liquidity amid a deepening slump in vehicle sales.
GM has been in talks on a takeover of its smaller rival, controlled by Cerberus Capital Management, the New York buy-out firm. But yesterday’s announcements were made separately.
Rick Wagoner, GM’s chief executive, and Fritz Henderson, president, said job cuts among salaried staff and contract workers were in the offing this year and in early 2009. “The global economic outlook remains very concerning,” they said in a letter. “As a result, actions are being taken throughout GM’s global operations to address our increasing need to conserve cash.”
GM aims to trim 15 per cent of its US salaried staff costs, or about 4,800 of its 32,000 white-collar workers. But the executives said: “We need to reduce our salaried and contract workforce by even more than we anticipated”. GM was also suspending matching contributions to salaried employees’ retirement savings plans.
GM has bled about $1bn in cash each month this year, and analysts expect the haemorrhaging to accelerate well into 2009, if not longer.
Cash reserves fell from $27.3bn last December to $21bn on June 30, and GM has said it needs $11bn-$14bn to keep its operations on an even keel. Chrysler will axe about 1,825 jobs by cutting one of two shifts at a Jeep and Dodge crossover plant in Toledo, Ohio, and accelerating the planned closure of a plant in Newark, Delaware, that builds sport-utility vehicles. The Newark plant has been operating on one shift since mid-2006. “We are in a time of historic change in the auto industry,” said Frank Ewasyshyn, manufacturing chief.
As a privately owned company, Chrysler does not disclose financial data but executives have indicated it has cash reserves of $10bn-$11bn.
Alan Mulally, chief executive of Ford Motor, said that the number two Detroit carmaker would not change the four-point plan he put in place shortly after taking the helm in September 2006.
Among other things, the strategy requires Ford to “aggressively restructure to operate profitably at the current demand and changing model mix”. It also calls for accelerated development of new vehicles that “our customers want and value”.
The plan, Mr Mulally said in an interview with the Financial Times, was “more right than ever . . . it’s broad enough and specific enough to capture the changing business environment”. Ford would continue to “restructure ourselves to operate profitably . . . no matter what happens or how bad this gets”. Ford has a bigger cash cushion than its rivals but is more highly leveraged. It has sold brands including Land Rover and Jaguar and might offload parts of its 33 per cent stake in Mazda.
GM and Ford had hoped to be insulated from the shrinking US market by buoyant sales elsewhere but sales in Europe and many other countries have slumped in recent months. Chrysler relies on the US for close to 90 per cent of its sales.
Jim Farley, Ford’s marketing chief, said that US light-vehicle sales this month are running at an annualised rate of 11m-12m units, down from 12.5m in September and 16m in October 2007. Each 200,000-unit drop in annual sales is about equal to the output of one plant.
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GM and Chrysler are perceived as relying heavily on their EV plans to consolidate their position in the market. In fact most auto manufacturers right now have EV plans including the mighty Rolls Royce, rumor has it.
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