GM Just Keeps on Shrinking

Posted by: David Welch on May 29, 2008

You can’t accuse General Motors Corp. of sitting still. While the company is en route to losing money for the third straight year and its stock languishes at $17 a share, bigger restructuring moves are rolling out. The company said today that 19,000 workers took the company up on buyout and early retirement offers made early in the year. That’s almost one-third of its 73,000 U.S. factory workforce. Many of those jobs won’t be filled. Many will be staffed by new workers making $14 an hour and with a weaker benefits package. Those workers will cost $26 an hour all in, compared with $62 an hour for today’s tenured workers.

That should save GM about $2 billion, says JP Morgan analyst Himanshu Patel. GM won’t say if it will close plants when it announces more details of its restructuring moves at the company’s annual meeting next week, but some plant closures could be in the offing. GM may have to in order to get in step with a rapidly-changing car market. Weak truck sales forced the company to cancel shifts at four truck plants already. Inside GM, the company has already mulled plans to get rid of one full-size-truck plant retool one to build something more fuel efficient. GM just doesn’t need to build as many trucks as its current factories can make. That was proven when, after a two-month supplier strike this year shut down its truck plants, dealers still had plenty of inventory.

GM needs to do all of this. Chairman and CEO Rick Wagoner has the support of his board, but he can’t keep losing money at home year after year. The company’s inability to make a real buck in North America has erased, in financial terms, Wagoner’s successful push into emerging markets. The extra production also pushes GM to offer profit-sapping discounts to move all those trucks. This round of cuts, which comes just two years after GM bought out 34,400 workers in a similar deal, will help GM’s costs both on the plant floor and within its marketing budget.

But it’s also a sign that GM’s product and brand strategies aren’t doing enough for the top line yet. That’s why the company must keep shrinking. Here are some stats. Before 2006, GM had 108,000 factory workers in the U.S and Toyota had a little more than 20,000. GM employed more than five times the factory help Toyota did. If, say, 10,000 of these 19,000 workers are replaced, GM will have 65,000 workers. When Toyota opens its new plant in Mississippi in 2010, it will have 25,000 factory hands, or a bit less than half what GM does. Now that’s a sign of the times.

Reader Comments

m.r.

May 29, 2008 6:28 PM

given, that GM has shown poor results for so long, I wonder why the Board allows the present management team to
stay on. GM needs changes at the top,
too.

mark thomas

May 29, 2008 7:19 PM

GM Ford and Chrysler have been living in a dreamworld. Fuel has been increasing for 3 years and they kept building trucks and SUV's.

Also they all have too many brands.Ford shuld get rid of mercury and GM should get rid of Pontiac and Buick

LunarRyder

May 29, 2008 7:27 PM

Our suggestion: GM, and many have profited from people, communities in the past and now is faced with a rough time, We think GM, & all corporations, wealthy individuals have a moral responsibility to make sure that (little people) people, communities get support to sustain themselves during these tough times.

NOTE: WHO CARES ABOUT THE SHAREHOLDERS : )

X

May 29, 2008 7:45 PM

Its not jst abt management, it abt the vision for future. GM needs to focus on consumers needs, which is more fuel-efficient vehicles. I hope the volt project is a success or else.. it going to be tough for them to compete with toyota.

JJ

May 29, 2008 8:35 PM

Agreed, I can't understand why they keep Wagoner. This guy looks like an 90s Buick.

Chris

May 29, 2008 9:57 PM

I can see how losing some of their overhead would help them, but they really have to worry about losing their market share. Steadily, foreign (or not so foreign, with Toyota opening so many plants here in America) car makers are steadily increasing their market share at Ford and GM's loss. Unless they can sell more of their vehicles, they're just fighting a losing battle for profits.

GM

May 29, 2008 10:18 PM

@M.R.
I agree. But GM is bureaucracy at its finest. Changes at the slowest pace possible. And what you want is usually what you don't need but for them it seems their wants always prevail.

DB

May 29, 2008 10:20 PM

Wagoner is a numbers person who has little vision and long term perspective. At a Havard meeting when asked why he continue to focus on big chariots with poor mileage and efficiency, he said" we give them want they want". Now GM has nothing to sell!

Snoz

May 30, 2008 1:01 PM

It's unfair to blame GM's woes on only Wagoner. There's also Wellburn and Lutz. All 3 will have to go if GM is to survive turn-around. For the last decade, their shrinking brains have caused GM's shrinking business. Roger Smith, former GM CEO, had a brain so small that no amount of shrinking made any difference. Smith's common engine-body-sheetmetal started GM's decline while Wagoner-Wellburn-Lutz, the 3 Clowns, exacerbated or accelerated the inevitable. The Old-Boy Network keeps promoting these old-fart-geezers to the helm; they have little car enthusiasm, little engineering skills, no understanding of style and consistently delivered inferior products since the '60s. They are bean counters. They are talkers but can't walk the walk. They look good on TV and give good sound bites. But in the end, they can't deliver. GM needs fresh young talent with new and better idea. The last time GM's 3 Clowns showed what they have in "fresh and new idea" was the Buick Aztek, the laughing stock of car design for years to come. They said they will create the Saturn brand, a brand that emphasize quality, economy, and value. In less than 10 years, Saturn is suffering from the same problems ailing other GM's division. Saturn has been mis-managed: over-used of plastic body panel; inferior engine technology; designs that failed to capture its niche consumer; quality problem persist; reliability not realized. The Hummer brand is a complete disaster, never should be been a separate brand but incororated into GMC truck division. At over $150 per fill-up and lowest mpg among the SUV, Hummer is bleeding GM to death.

M.T.

May 31, 2008 9:24 AM

GM has made mistake after mistake. For example, Buick-Pontiac-GMC decided to combine agencies and choose the agency that sunk Oldsmobile (Leo Burnett) into its desolve. Yet, the Marketing Director (J.B.) is still there and sales have plummented by double digits since this man's decision. Also, GM fought tooth and nail to not have the government make GM to have more fuel efficient cars and trucks. Millions were spent to fight this. If they only listened to the Goverment, they would not be in the mess that they are in.

Sc

June 1, 2008 7:47 AM

GMC is a great company with products that are great but behind the times. No one wants their big fuel guzzlers any more. There seems to be a complete lack of strategic vision at the top. They must seriously take action to make vehicles which the customers want and not just what GMC wants to make.

The action better be urgent or there would be no GMC left to talk about...

Tim from PHX

June 2, 2008 4:44 PM

Would you rather invest in the car company who says they will be the market leader in 5 years or the companies that have been leading the industry in the past 5 years?

GM has been coulda-woulda-shoulda for decades. How many battery factories is GM now building for their efficient, small hybrid cars. Oops. 5 years behind ... again.

Instead building cars USA needs, (c)Lutz & Co. are launching a 550hp Cadillac CTS coupe next year. Brilliant. It will continue to be the Death of a Thousand Cuts until GM finally runs out of cash.

ollie

June 2, 2008 6:46 PM

lutz put a 4 banger diesel in the small truck now.i have parked my durmax and driving a 99 3800 gas.dont wait to see if people will buy and half ton diesel or a 50 grand suv hybrid.great job so for. og.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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