General Motors Slashing 25,000 Jobs, Shutting Plants

General Motors will close more plants and eliminate about 25,000 jobs in a bid to revive its struggling North American operations. CEO Rick Wagoner told company shareholders that the cuts would take place between now and 2008 and save the company about $2.5 billion a year.

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Today General Motors said it wants to eliminate at least 25,000 jobs and close some plants. It's part of an effort to reverse the company's sagging financial fortunes. GM lost more than a billion dollars in the first quarter of the year, and it's watched its market share erode. To make a turnaround succeed, GM says it also needs to reduce its spiraling health care costs. And company officials are pressing unions to accept benefit cuts. NPR's Jim Zarroli reports.

JIM ZARROLI reporting:

GM stockholders have seen their shares fall sharply this year; they hit a 10-year low in April. So investors came to the company's annual meeting in Delaware today looking to hear how GM plans to turn things around. What they heard from chairman and chief executive Rick Wagoner was both hopeful and pragmatic.

Mr. RICK WAGONER (Chair and CEO, General Motors): We have some serious challenges to address, but we also have a solid base to build off.

ZARROLI: Wagoner said GM was introducing several new promising car models and was trying to improve its marketing efforts in parts of the country where it's less competitive. But Wagoner said GM also needs to reduce its costs, including soaring employee health-care expenditures. He said the current double-digit increases in health-care costs were swamping any effort by the company to revive itself.

Mr. WAGONER: This rapidly rising health-care burden is not, in fact, unique to GM. It is a critical national competitiveness issue for the United States, affecting our entire economy's long-term strength.

ZARROLI: Wagoner said GM also wants to begin closing some plants and hopes to eliminate at least 25,000 jobs by 2008, about 8 percent of its work force. He didn't say which plants would be affected or whether the cuts would come through layoffs or attrition. Mark Oline is an auto industry analyst at Fitch Ratings Service, which this year cut GM's bond rating to junk status. He says simply cutting jobs through attrition won't be enough.

Mr. MARK OLINE (Fitch Ratings Service): And that really would not be substantially different from the trend line that they're on now. And the question will remain whether they can also get additional structural costs in addition to the head count reductions.

ZARROLI: To really make a dent in its costs, Oline says, GM will probably have to address its health-care expenses and do real layoffs. But the current contract between GM and the United Auto Workers makes it virtually impossible for the company to lay off workers or close plants without the union's permission. David Healy is an auto analyst at Burnham Securities.

Mr. DAVID HEALY (Burnham Securities): They can lay off additional people and close plants, but it's kind of economic suicide in a sense because the laid-off workers get nearly full pay.

ZARROLI: And Healy says the company would have to keep paying the workers' salaries until the contract expires. UAW officials declined to comment on Wagoner's announcement today, and they did not respond to a request to discuss the current contract. Outside a GM Cadillac plant in Detroit, workers like Jim Kamisky(ph) seemed in little mood to give much back to the company. Kamisky blames GM executives for the company's troubles.

Mr. JIM KAMISKY (General Motors Employee): Poor leadership, my opinion. They get paid a lot of money to keep from getting this company in trouble, and they fail to keep the jobs going. That's all. Well, Chapter 11 is the other alternative.

ZARROLI: UAW officials have said they won't reopen their current contract, which expires in 2007, but have hinted at some flexibility when they negotiate a new contract. GM chief's executive, Rick Wagoner, said GM was talking to the union about cost reductions.

Mr. WAGONER: Let me just emphasize that our strongly preferred approach is to do this in cooperation with the UAW because we're convinced that's the best way for our employees, our stockholders, all of our constituents.

ZARROLI: Whether or not GM can persuade the union to give back some of its benefits, investors at least seem to like what they heard today. The sight of GM trying to address its financial problems sent the company's stock price up by about 1 percent. Jim Zarroli, NPR News.

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