GM to cut jobs, sell assets, raise cash to survive

Source: Agencies  |   2008-7-16  |     ONLINE EDITION

GENERAL Motors Corp yesterday announced a plan to cut costs by US$10 billion, suspend its common stock dividend and sell up to US$4 billion in assets in a bid to shore up cash and survive a deep industry slump.

The hurried restructuring, GM's second in just six weeks, was forced by high fuel prices, a consumer shift away from low-mileage trucks, the weakest US auto sales in a decade, and growing investor doubts about the automaker's ability to ride out the downturn.

GM, which has lost US$51 billion over the past three years as it has cut jobs and closed plants, said the steps were aimed at addressing deepening concerns that have driven its stock price to 54-year lows and raised the cost of insuring its debt against default.

"What we saw was an even decidedly more hostile environment in the capital markets," GM President and Chief Operating Officer Fritz Henderson told reporters. "You saw financial markets almost seize up."

The automaker said it would cut white-collar costs by 20 percent, a step expected to mean the loss of thousands of jobs among the 40,000 salaried workers GM employs in North America.

GM shares rose nearly 7 percent on the restructuring news but remain down about 60 percent this year. Since Chief Executive Rick Wagoner took over in 2000, the shares have fallen about 80 percent.

Analysts said GM's plan, intended to raise US$15 billion in liquidity through 2009, addressed the most urgent Wall Street concerns about pressure on its US$24 billion in remaining cash.

But they cautioned that the company's turnaround still hinged on a recovery in the US economy and on GM's ability to sell more fuel-efficient passenger cars, a market now dominated by foreign makers led by Toyota Motor Corp.

GM also has faced criticism for restructuring steps since 2005 that have consistently fallen short of what was required given the downward spiral in its results.