GM to Close Nine Plants, Lay Off 30,000

DETROIT – General Motors Corp. (GM) on Monday said it will eliminate 30,000 manufacturing jobs, close or reduce operations at 12 plants in North America and slash its vehicle output as the automaker struggles to avoid bankruptcy.

The job cuts represent 27 percent of the company's total North American manufacturing work force, using GM data from the end of last year. The announcement by Rick Wagoner, chairman and CEO of the world's largest automaker, represents 5,000 more job cuts than the 25,000 the automaker had previously indicated it planned to cut.

The plan would allow the company to achieve $7 billion in cost reductions by the end of 2006 — $1 billion above its previous target and represents 5,000 more job cuts than the auto maker had previously indicated.

General Motors shares were up 35 cents, or 1.5 percent, at $24.40 on the New York Stock Exchange. The auto giant has lost nearly $4 billion this year, while its shares have lost more than 40 percent of their value and hit a 14-year low last week.

GM said the assembly plants that will close are in Oklahoma City; Lansing, Mich.; Spring Hill, Tenn.; Doraville, Ga.; and Ontario, Canada.

An engine facility in Flint, Mich., will close, along with a separate powertrain facility in Ontario and metal centers in Lansing and Pittsburgh.

Wagoner said GM also will close three service and parts operations facilities. They are in Ypsilanti, Mich., and Portland, Ore., as well as one unidentified site. A shift also will be removed at a plant in Moraine, Ohio.

"The decisions we are announcing today were very difficult to reach because of their impact on our employees and the communities where we live and work," Wagoner told employees.

"But these actions are necessary for GM to get its costs in line with our major global competitors," he said. "In short, they are an essential part of our plan to return our North American operations to profitability as soon as possible."

Wagoner said last month the automaker would announce plant closures by the end of this year to get its capacity in line with U.S. demand. GM plants currently run at 85 percent of their capacity, lower than North American plants run by its Asian rivals.

GM has been crippled by high labor, pension, health care and materials costs as well as by sagging demand for sport utility vehicles, its longtime cash cows, and by bloated plant capacity. Its market share has been eroded by competition from Asian automakers led by Toyota Motor Corp. GM lost nearly $4 billion in the first nine months of this year.

Wagoner said the company has informed the leadership of the United Auto Workers union of the moves, calling it "tough medicine for us and it's tough medicine for everyone involved."

Wall Street analysts had been anticipating these cuts for some time.

"The CEO is effectively trying to calm the markets and show that he's still in control," said Richard Steinberg of Steinberg Asset Management. "We would anticipate management changes over the next couple of years if they don't figure out a game plan."

The troubled automaker also said an agreement with the UAW will allow it to cut employee health care costs by about $3 billion annually.

GM has been grappling with high health-care and commodities costs, loss of U.S. market share to foreign rivals, and slumping sales of large sport utility vehicles that used to be its profit centers, but have now lost popularity due to high gasoline prices.

To make matters worse, GM's main parts supplier — bankrupt Delphi Corp. — is battling with its unions and will ask the court to void its labor contracts if a deal is not reached by mid-December. A strike at Delphi could shut down some GM and Delphi plants and could force the automaker to burn through billions of dollars a week, analysts have said.

Reuters and the Associated Press contributed to this report.