GM to axe 10,000 jobs as gloom in the global car industry deepens

GM is to axe 10,000 jobs and slash executive pay to cope with the massive downturn in the worldwide car market, the US motor giant said yesterday.

Some 14 per cent of the company's 73,000-strong workforce will go, 3,400 of them from the US. White-collar staff will see pay cheques trimmed by 10 per cent over the year, and other employees face salary reductions of between 3 per cent and 7 per cent.

The aim is for the US cuts to be completed by May. It is not yet clear how the global plans will affect the 5,000 GM UK staff. "There will be some impact in the UK but we don't yet know what it will be," a spokesman said. "Over the whole year, reductions will include natural attrition and voluntary programmes before getting to compulsory redundancies."

GM UK accounts for the Chevrolet, Vauxhall, Saab, Cadillac, Corvette and Hummer marques. Some 2,000 are employed at the group's Ellesmere Port plant, which builds 110,000 Vauxhall Astras per year. Another 1,400 work at GM's Luton factory, which churns out 90,000 Vauxhall Vivaro vans each year. But with sales down by 18 per cent, GM UK is bringing working hours down to the equivalent of a four-day week from 16 February in order to balance supply with falling demand.

GM was not the only bleak news for the automotive sector yesterday. Fresh from French President Nicolas Sarkozy's €6bn (£5.3bn) bailout at the start of the week, PSA Peugeot Citroën's chief executive, Christian Streiff, described the situation in the car industry as a "worldwide catastrophe", and said he expects sales to fall by 20 per cent this year. The problem for suppliers is that sales are suffering in developing, as well as developed, economies. "The Brazilian market, the Chinese market and the Russian market have stopped in their tracks," Mr Streiff told RTL radio.

Across the world, the industry is in paroxysms as falling demand and lack of credit wreak havoc. The French government's rescue package, assuming it is passed by European competition regulators, will provide Peugeot Citroë*and Renault with loans of up to €3bn each, in return for guarantees that French factories remain open. Both have also promised there will be no job cuts this year. In the US, GM and rival Chrysler – which sought safety in numbers last month by selling a 35 per cent stake to Fiat – must submit convincing restructuring plans to the US Congress next week to justify the tranche of the $14bn (£9.6bn) Troubled Asset Relief Programme funding already granted, and qualify for more.

In the UK, the government launched a £2.3bn loan guarantee programme for low-carbon initiatives at the end of last month, and is discussing further measures to ease acute financing problems. But GM is not the only big manufacturer already scaling back its operations. All UK factories have cut production, and jobs are also being lost. Jaguar Land Rover has cut 1,450 posts since the autumn. Ford will be laying off 850 by May.

Of less concern for the UK is the 20,000 worldwide redundancies announced by Nissan at the start of the week. The Japanese giant has already said that 1,200 jobs will go from its Sunderland plant, and those are included in the global total.

But further cuts are still possible, although concerns that M. Sarkozy's mandated domestic focus for Renault, which owns 44 per cent of Nissan, could spell trouble for Sunderland are likely to prove unfounded. Professor Garel Rhys at the Centre for Automotive Industry Research at the Cardiff Business School said: "Mercifully, nothing at the moment that is made in Sunderland is also made by Renault in France."