General Motors Corp., saddled with $70 billion in losses since 2004 and declining sales, will eliminate more than the 5,000 salaried jobs already targeted and stop contributing to some retirement-savings plans.
Slower than predicted sales in the United States and Europe are forcing deeper cuts, the largest U.S. automaker said in a letter to executives. Detroit-based GM will halt matching payments of as much as 4 percent to nonunion employees' 401(k) savings plans Nov. 1 and end programs to assist with tuition and adoptions in January, spokesman Tom Wilkinson said Thursday.
“This just reflects the severe global slowdown in demand,” said Pete Hastings, a Morgan Keegan Inc. fixed-income analyst in Memphis, Tenn. “Cutting workers and the 401(k) match is pretty severe, but you have to do what you have to do to preserve cash.”
GM was considering a new round of cost reductions because a planned $15 billion in asset sales and savings won't be enough to maintain its liquidity, people familiar with the matter said Wednesday. The drop in sales in the U.S. and Europe is spurring the effort to re-examine spending four months after its last effort was announced, the people said.
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“The global economic outlook remains very concerning,” Chief Executive Officer Rick Wagoner and Chief Operating Officer Fritz Henderson said in the letter to executives. “As a result, actions are being taken throughout GM's global operations to address our increasing need to conserve cash.”
Involuntary reductions in salaried and contract positions will begin later this year, GM said in the letter, without giving numbers.
GM had offered more than 9,000 salaried employees early retirement as part of a plan to get about 5,000 workers to leave by Nov. 1. Those retirement offers aren't yet complete.
The global credit freeze threatens to send U.S. auto sales to a 27-year low in 2009, speeding GM's cash burn. The crisis also is driving merger talks with Chrysler owner Cerberus Capital Management LP, according to the people familiar with the matter.
Cerberus, a New York-based buyout firm, wants to keep a Chrysler stake in any merger and is willing to contribute cash to a new company, the people said. GM is pushing for an accord this month, one person said. While the talks are progressing, there isn't a framework for an agreement, the people said.
GM is the preferred partner for Chrysler even as Cerberus meets with Nissan Motor Co. and Renault SA, the people said.
Renee Rashid-Merem, a spokeswoman for GM, had no comment about any further savings initiatives. GM, Chrysler and Cerberus aren't commenting on the merger talks.
Chrysler Thursday said it will eliminate about 1,800 jobs when it closes a Delaware plant a year early and eliminates a shift at a Jeep factory in Ohio because of the sales slowdown.
Investors haven't been reassured by the liquidity push at GM. The automaker's shares slumped 38 percent since announcing its $15 billion plan on July 15, outpacing the 21 percent slide for the Dow Jones Industrial Average.
GM fell 9 cents to $6.10 on Thursday. The shares have fallen 75 percent this year, the most in the 30-company Dow average.