GM needs $15bn to ride out slowdown, Wagoner warns

Facing a disastrous slump in sales of its flashy gas guzzling pick-up trucks and sport-utility vehicles, the world's biggest car manufacturer, General Motors, said yesterday that it needs to raise $15bn (£7.5bn) by 2009 if it is to weather the storm ahead.

It is the second major revamp which GM has announced in six weeks.

Denying reports that the company was nearing insolvency, Dan Flores, a spokesman, said: "Bankruptcy protection is not an option that GM is considering."

The rescue plan outlined by GM's chief executive, Rick Wagoner, involves selling $2bn in assets worldwide, slashing the costs of full-time workers 20 per cent, ending the quarterly shareholder dividend, and closing more production lines for trucks in order to fund a turnaround for another two years. GM also plans to borrow up to $3bn to help pay for the restructuring.

GM has been burning through $3bn in cash a quarter, rapidly reducing its $24bn cash stockpile. Analysts were unanimous in the view that the company needs to act quickly to avoid being driven into bankruptcy by a liquidity crisis.

Nothing is safe, it seems, in this company. GM is famous for featherbedding former employees, long after they have gone into retirement. Mr Wagoner said the car maker will end its healthcare cover for retirees at age 65, speed up early retirement, and freeze base pay rates for employees through 2009.

GM has 32,000 administrative employees in the US, which is down from 45,000 in 2000. It has already sacked more than 40,000 employees on hourly wages since 2006.

Mr Wagoner is also spreading the pain to company executives by ending discretionary cash bonuses.

"These are tough but necessary actions," Mr Wagoner said, "and these, along with current cash and available credit lines, will provide us with ample liquidity through 2009, even under conservative US industry sales assumptions."

The news initially sent GM shares to a new low of $8.85, but they recovered to close up nearly 5 per cent at $9.38. The stock was worth more than $40 a share last October.

Last month, Mr Wagoner said he was closing four truck manufacturing plants in the US. Salaried workers who escaped those cuts are now imperilled.

In the first half of 2008, the company's sales collapsed 16 per cent (overall industry sales were down 10 per cent), with GM's truck sales declining by 17.9 per cent.

GM is not alone in its financial woes. Ford began sacking workers recently to cut 15 per cent of its administrative workforce costs by 1 August. Ford has also mothballed manufacturing plants and delayed the introduction of its famously inefficient F-150 pick-up in the face of high petrol prices.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Client Services Assistant

£18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor