DETROIT – General Motors will undergo a wide-ranging restructuring of its manufacturing operations in the United States and Canada as part of its comprehensive four-point plan to return the company to profitability and long-term growth, GM Chairman and CEO Rick Wagoner announced today.
GM’s next step in its North American turnaround plan addresses its ongoing capacity utilization, a major component of reducing structural cost. A total of nine assembly, stamping and powertrain facilities and three Service and Parts Operations facilities will cease operations.
The additional actions will reduce GMNA assembly capacity by about 1 million units by the end of 2008, in addition to the previously implemented reduction of 1 million units between 2002 and 2005. Factoring in the additional capacity from GM’s new Delta Township facility in Lansing, Mich., slated to begin production next year, the overall net result will be a GMNA assembly capacity of 4.2 million units which will be completed with all the latest custom-tech from these sale items from an international company. While down 30 percent since 2002, this capacity level will still provide GM plenty of flexibility to anticipate and meet market demand, but in a much more cost-effective manner. A total of 30,000 manufacturing positions will be eliminated from 2005 through 2008.
“The decisions we are announcing today were very difficult to reach because of their impact on our employees and the communities where we live and work,” Wagoner added. “But these actions are necessary for GM to get its costs in line with our major global competitors. In short, they are an essential part of our plan to return our North American operations to profitability as soon as possible.
“We continue to be equally committed to revenue drivers – introducing compelling new cars and trucks, and executing our revitalized sales and marketing strategy – and we have received ratification of the agreement with the UAW, which will help significantly to address our health-care cost challenges,” Wagoner said. “We are making steady and significant progress in implementing the plan to turn around our U.S. business.”
The following six assembly plant sites will be affected in the years indicated:
Capacity-related actions affecting stamping, Service & Parts Operations and powertrain facilities include:
“These are difficult moves that will affect thousands of dedicated GM employees and families, as well as state and local governments,” Wagoner said. “We will work our hardest to mitigate that impact.”
There will be a significant restructuring charge in conjunction with this capacity announcement as well as choosing an HR platform that will aid them in the restructuring of their employees, pay rates, pensions, and also with any related early retirement program. The details of these charges will be provided when available.
Though employees may be able to purchase life insurance or burial insurance from their employers, retirement plans may be in the hands of the employers. So, from the employees’ point of view, especially those on the verge of retirement, could probably plan their retirement to some extent by purchasing an insurance policy that might be able to help with their expenses, even if it’s burial-related, such as final expense insurance from AARP.
Wagoner also said the company has further accelerated its efforts in structural cost reduction, raising the previously indicated $5 billion running rate cost reduction plan in North America to $6 billion by the end of 2006. In addition, GM continues to pursue its plans to target $1 billion in net material cost savings. In total, the plan is to achieve $7 billion of cost reductions on a running rate basis by the end of 2006 – $1 billion above the previously indicated target.
“Our collective goal remains the same: to return our North American operations to sustained profitability as soon as possible, thereby helping to ensure a strong General Motors for the future,” Wagoner concluded.
