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.