GM cutting spending, salaries to raise cash

General Motors said Tuesday it will reduce its white-collar workforce, suspend its dividend, cut spending on marketing and make more production cutbacks.

Rick Wagoner, the automaker's chair and chief executive officer, said the actions, along with raising new capital and selling assets, will generate about $15 billion US through the end of 2009.

Hummer SUVs sit on a U.S. dealer's lot. The brand is the subject of a review as part of GM's effort to raise money and refocus the company.(Danny Johnston/Associated Press)

"We've a big job to do," he told reporters in a briefing broadcast from Detroit.

The company has been the subject of speculation that it will run out of money as car markets shrink with higher oil prices. The intent of the changes is to create a "robust liquidity situation," Wagoner said.

"We can't sit back and wait for U.S. conditions to improve," he said. "We're trying to protect against the downside."

The actions announced Tuesday will provide the company with liquidity through the end of 2009, GM said.

Of the total, a forecast $10 billion will come from cuts and reductions, and somewhere between $4 billion and $7 billion will be from asset sales and new financing.

The cuts will come from:

Reductions in truck capacity: $2.5 billion.White-collar salaries: $1.5 billion, a 20 per cent cut.Capital spending: $1.5 billion.Deferred payments: $1.7 billion.Raised working capital: $2 billion.

GM is going to speed up previously announced closures of pickup truck plants in Oshawa, Ont., and three U.S. and Mexican locations, chief operating officer Fritz Henderson said.

But David Paterson, GM's vice-president corporate and environmental affairs in Oshawa, said the company was hoping to raise car production in Canada.

He also said the Canadian operation was expecting "very minor impacts, if any" in terms of white-collar job losses, though there would be reductions in marketing and product development costs.

Throughout the company, GM plans to cut salaried staff, but attrition, buyouts and retirements may mean there is no need for layoffs.

Health coverage for U.S. salaried retirees will be eliminated, although pensions will be increased.

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There will be no more base salary increases this year or next, and no cash bonuses for executives. For top executives, the reduction could be as much as 84 per cent, GM said.

The truck plans will reduce the number of vehicles to be produced by 300,000 by the end of 2009. Half of the 300,000 are new cuts, with the other half previously announced.

There will also be thousands of job losses at other truck assembly and parts factories, he said.

The company initially wants to borrow $2 billion to $3 billion, pledging stock of foreign subsidiaries or its finance arm as security.

GM stock finished Tuesday up 46 cents to $9.84.

1st round of cuts in June

The moves announced Tuesday are the second round of slashing at the automaker in two months. On June 3, it announced plans to close its Oshawa, Ont., truck plant, and three others.

The company said then it was shifting away from trucks and sport utility vehicles to focus on smaller car production in response to shifting consumer demand. Higher gasoline prices have prompted buyers to shun big vehicles in favour of more fuel-efficient automobiles.

GM also said at the time that it was reviewing the future of its Hummer brand.

With files from the Associated Press

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