GM takes the axe to 30,000 jobs and 12 US plants

General Motors is to axe 30,000 jobs and close 12 of its North American plants in an attempt to stem crippling losses in its US car-making operations.

The cuts announced yesterday involve 5,000 more job cuts than expected and will reduce GM's car manufacturing capacity in North America by a further one million units, helping deliver $7bn (£4bn) of annual cost savings by the start of 2007. GM's worldwide workforce currently stands at 325,000 in 32 countries.

Rick Wagoner, GM's chairman and chief executive, said: "These actions are necessary for GM to get its costs in line with our major global competitors. In short, they are an essential part of our plan to return our North American operations to profitability as soon as possible."

He added that GM hoped to achieve much of the job reductions through early retirement and natural staff turnover. GM said it hoped to reach agreement with its unions on an early retirement plan as soon as possible.

In the first nine months of the year, GM lost $4bn in North America, where it has been hit severely by competition from Japanese manufacturers such as Toyota, particularly in the pick-up or utility vehicle sector of the market.

The cutbacks will be phased in between now and 2008 and will reduce GM's North American manufacturing capacity to 4.2 million units. Last year GM sold 9 million cars and trucks worldwide. GM has already cut capacity by one million units under an earlier cost-cutting drive which began in 2002.

The job cuts and plant closures follow agreement last month between GM and its labour unions to reduce the car giant's healthcare liabilities by a total of $15bn. The annual reduction in GM's healthcare costs will contribute $3bn of the $7bn target announced yesterday.

GM again brushed aside suggestions that it might ultimately be forced to seek bankruptcy protection, saying: "We have no plans to file for Chapter 11, we are pretty clear on that."

The facilities being closed by GM include nine assembly, body pressing and engine plants and three service and parts operations. Following the closures, GM's total capacity in 2008 will be 30 per cent lower than it was in 2002.

In June, GM indicated that its cost-cutting plan would produce savings of $5bn. Yesterday, it said that figure would be running at an annualised rate of $6bn by the end of 2006. In addition, the company is continuing to pursue plans to reduce its components bill by $1bn a year.

The cost-cutting initiative is part of a two-pronged strategy to return to profitability in GM's home market. The other half of the strategy is to improve the model line-up.