GM Talks With Union Likely to Heat Up With Plans to Close Plants, Cut 25,000 Jobs

WILMINGTON, Del.June 8, 2005; John Porretto and Dee-Anne Durbin writing for the AP reported that General Motors Corp.'s negotiations with its main labor union are likely to intensify as the automaker plans to close plants and shed 25,000 U.S. jobs over the next three years.

Chairman and Chief Executive Rick Wagoner outlined plans at GM's annual shareholders meeting Tuesday to shrink its North American operations, the largest and most troubled part of its business.

The company has been hurt in recent years by lackluster sales of its highly profitable trucks and sport utility vehicles and market share loss to Asian rivals. The capacity and job cuts should generate annual savings of roughly $2.5 billion as GM eliminates one out of every six jobs in the United States.

GM also has pleaded for relief from its $5 billion annual health insurance bill for 1.1 million workers and their families, but the United Auto Workers has been reluctant to open a contract that doesn't expire until 2007.

"No one has a greater stake in the success of General Motors than UAW-GM members, and no one has played a more vital role in GM's strong gains in productivity and product quality," said UAW Vice President Richard Shoemaker, who directs negotiations with GM.

Wagoner noted that health care expenses add $1,500 to the cost of each GM vehicle. This puts GM at a "significant disadvantage versus foreign-based competitors," he said, echoing comments made by the Standard and Poor's and Fitch ratings services after both reduced the company's bond rating to "junk" status last month.

The job cuts would be on top of earlier reductions that pared GM's U.S. work force from 177,000 hourly and salaried employees at the end of 2000 to 150,000 at the end of last year, according to figures provided by GM.

"Let me say up front that our absolute top priority is to get our largest business unit back to profitability as soon as possible," said Wagoner, who added that with $20 billion in cash and short-term investments, GM is in no danger of going out of business anytime soon.

Wagoner wouldn't say which plants are in danger of being closed, but David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said the most likely targets are several older plants. Those include facilities in Janesville, Wis.; Doraville, Ga.; Oklahoma City and Pontiac, Mich., he said. The Janesville plant was built in 1919 and the Doraville plant was built in 1947. The other two plants were built in the 1970s.

Cole said GM probably won't close plants that have recently undergone costly renovations, such as the plant in Lordstown, Ohio, that recently got $1 billion worth of upgrades.

Disgruntled shareholders, who saw the value of their shares fall to a 10-year low in April, gave Wagoner an earful on Tuesday.

"This company is sick," said James Dollinger, a Buick salesman from Flint, Mich., who angrily told Wagoner he should resign.

Fending off such criticism, Wagoner outlined 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.