GM plans to sell ACDelco; more cost cuts likely

General Motors Corp. is likely to announce additional cost cuts as part of its third-quarter earnings announcement, in an effort to generate enough cash to sustain itself until the economy improves, people familiar with the automaker’s plans said today.

Every facet of the organization is under scrutiny for possible cuts, they said. One person said the cuts are expected to include such moves as the cancellation or delay of some vehicle programs, which could result in reductions in engineering and design staff.

The plans for further cuts come as GM is negotiating a potential merger with Chrysler LLC and is adding to the assets it has up for sale. GM announced plans today to sell its longtime replacement-parts division, ACDelco.

The moves are necessary because GM’s initial plans to generate $15 billion through 2009 won’t be enough, given the effect that a worsening economy and tight credit market have had on vehicle sales, the people familiar with the plans said.

GM has not set a date to announce its third-quarter financial results, but estimates have projected a loss of $2 billion.

Company spokeswoman Renee Rashid-Merem declined to comment on new cost-cutting plans.

GM announced in July a plan to generate $15 billion in cash for operations before 2010. The company said it would generate that cash by cutting $10 billion in costs and raising $4 billion to $7 billion by selling assets or borrowing against them.

Then in August, the company said it would accelerate those plans. And in the past 30 days, it announced earlier closing dates for three plants and plans to close an additional plant.

Today, GM announced that it retained Merrill Lynch to assist in the sale of ACDelco, which has roots older than GM.

“They’re looking at selling anything they can to preserve the core operations,” Van Conway, managing director of Conway, McKenzie & Dunleavy, said of GM’s decision to sell the division that offers more than 100,000 parts, ranging from wiper blades to radiators. “They’re looking to sell any part of the business that can generate cash.”

The company already has said it is pursuing the sale of its Hummer brand of sport-utility vehicles and a manufacturing plant in Strasbourg, France. GM executives have acknowledged that they would consider selling other assets.

It makes sense for GM to sell ACDelco, analysts say, because it is not core to the business of manufacturing and is believed to be profitable. GM would not comment on the division’s financials.

ACDelco is based in Grand Blanc and employs about 600 people worldwide, including 400 in the United States. While ACDelco is distributed by warehouses and distribution centers throughout GM, at least two warehouses — in Columbus, Ohio, and Fontana, Calif. — are solely dedicated to the division.

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