GM To Cut Salaried Staff, Dividend, Retiree Health Care

[Purveyor]

Source: Detroit News

DETROIT -- General Motors Corp. Chairman and CEO Rick Wagoner today outlined a new round of cost-cutting measures aimed at boosting the automaker's cash flow by $15 billion.

"Since the first of this year, our progress has been threatened as U.S. economic challenges become (more) difficult," said Wagoner, calling higher fuel costs a structural change, not a cyclical change, to which the automaker must adapt. "In the past six weeks, U.S. market and economic conditions have continued to decline. These require us to take further actions."

Among the items he announced:

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• A 20 percent reduction in salaried worker costs through a variety of means including normal attrition, early retirement and voluntary separation programs. GM's salaried workforce has declined by about 12,000 to 32,000 since 2000, when Wagoner became CEO.

"The vast majority of actions will come without involuntary layoffs," said Wagoner. He said he expected an early retirement offer to be successful because such packages haven't been extended to white collar workers for the past several years.

• Cutting health-care coverage effective Jan. 1, 2009 for Medicare-eligible salaried retirees, partially offset by increased pension payments.

• No pay raises for salaried workers through the end of 2009.

• No discretionary bonuses for executives.

• Reducing truck capacity and related component capacity. GM expects to cut 300,000 units by the end of 2009, about half by already announced actions and half by new steps, Wagoner said. Last month, GM said it would cut 170,000 trucks from its production plan later this year.

• Cutting and consolidating sales and marketing budgets, including motorsports activity.

• Holding engineering spending to 2006-07 levels through the end of 2009.

• Reducing capital spending.

• Suspending the dividend on common stock, to save $800 million through 2009.

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DETROIT NEWS: http://www.detnews.com/apps/pbcs.dll/article?AID=/20080715/AUTO01/807150401

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[Auggie]

1. Cutting health-care coverage effective Jan. 1, 2009?

Does this mean reducing or eliminating?

[Barb in Atl]

2. Looks like dropping entirely

• Cutting health-care coverage effective Jan. 1, 2009 for Medicare-eligible salaried retirees, partially offset by increased pension payments.

So for those that are eligible for Medicare, they lose retiree health care but get an increase in the pension.

Sounds reasonable - but I'm not in their position. Could suck mightily.

[Auggie]

5. When you're 80 years old it's huge, no matter what the increase in pension.

It's not reasonable for people in frail health with limited options who were promised something else.

When my Dad was offered early retirement in 1984 he and Mom were guaranteed 100% health coverage for life. That was the carrot GM dangled to reduce him from the ranks. Through the years they've been trimming away at that benefit. Yeah, I know it sounds ridiculously generous by today's standards, but had Dad known it was sham promise he might have opted to work a few more years.

This is going to alter their health care options severely, depending how deep the cuts are. Dad worked his butt off keeping the assembly line humming in the 60's and 70's. Some thank you.

[TNOE]

6. Ditto your sentiments exactly!!

Same here for my Dad - who worked his ass off & watched them carry out other men on stretchers having nervous breakdowns. I hate to even give them this news. But figured it was coming.

[Auggie]

7. The thing that irks me the most is that it was so preventable

"We can't retool - can't introduce new models -- it might hurt short-term profits."

I can't understand at this point why GM, Ford, Chrysler don't have fleets comprised of 80% hybrid vehicles by now. Or at least 50%. No, that might have cut into quarterly profits back in 2005.

Someone posted yesterday about the destructiveness of chasing quarterly profits. They couldn't have been more right.

[WriteDown]

8. Maybe not....

Even if they did as you say, the demand and profits were in trucks and SUV's up until recently. That is undeniable. They're real problem is the higher costs they are obligated to pay and the sucessful marketing campaign of Japanese automakers. Not to mention the American public's unwillingness to pay even a single dime more for a car even if it is union made.

[Auggie]

10. Good points

Maybe things wouldn't be quite so dire.

As a white collar worker Dad did get almost everything Union got. Unfortunately, those generous benefits they received decades ago are coming back to haunt everybody.

Greed... wow, it really does bring down everything.

[Kolesar]

9. Until recently, *nobody* was buying efficient vehicles--even the Toyota Echo failed in the market

[Auggie]

11. True

What a mess.

[Purveyor]

4. Sounds like cutting it for retirees that are on medicare.

This means they will have to go out and pick up a private policy to cover the medical costs not covered by medicare.

My mom pays around $600 a month for such a policy but with all her surgeries a couple of years ago, she never had to pay a dime.

BTW, the union sponsored supplemental plan eats up all but $10 of her pension check from the Operating Engineers.

[WriteDown]

3. Yay!!!!!

Just trying to be the 1st to cheer this on. :sarcasm:

[hughee99]

12. Helluva job, Ricky...

Since CEO Rick Wagoner took over in 2000, the stock has dropped from at least 50 (and possibly a high of 82, depending on which month he took over), to it's current value of around 9, has lost 34,000 hourly jobs just since 2006, and is currently losing about $1 Billion a month. As far as I can tell, the ONLY success this guy has had since he took over was to keep his job this long.

[michreject]

13. For all those who think that the people are getting screwed

Help them out by keeping on buying them foreign POS cars.:grr:

This is not intended to start a flame war. Just MY opinion.

A UAW local 160 retiree.

[Megahurtz]

14. How kind.

NOT.

[BeatleBoot]

15. Wow. No Discretionary Bonuses for Executives

They're playing hardball now.

:rofl: