General Motors (GM), the US car maker, tried to banish talk of bankruptcy yesterday as it laid out plans to save $7 billion (€5.97 billion) a year by slashing 30,000 North American jobs and closing five vehicle factories.
The cuts will reduce GM's production capacity in the US and Canada by about 800,000 units a year to 4.2 million units by 2008.
At present, it estimates that its factories are running at only 85 per cent of capacity.
The plan gives Rick Wagoner, chairman and chief executive, breathing space after a frantic two weeks during which negotiations with unions were overshadowed by investor fears that the company could file for bankruptcy protection.
GM lost $4.1 billion in North America in the first nine months of the year and Delphi, its biggest supplier, is already in Chapter 11 bankruptcy protection from creditors.
The company is also likely to lose the symbolic position of world's largest car maker for the first time in more than 70 years, with Japan's Toyota expected to make more vehicles than GM next year or in 2007.
"It is enough to placate sensationalist fears of bankruptcy," said Himanshu Patel, motor analyst at JPMorgan in New York.
"But they still haven't answered the question of how they are going to stop the market share loss."
GM's US market share has fallen from 43 per cent in 1982 to 26 per cent in the third quarter of this year.
The company's shares and bonds jumped on the news of $1 billion higher cost savings than expected, but both fell back to trade almost flat in the early afternoon amid the lack of information on the cost of the restructuring.
The job losses, which GM hopes to achieve through early retirement and natural attrition, have yet to be approved by the United Auto Workers' union.
The union said it "would do everything in its power to enforce" job security agreements.
Mr Wagoner said: "This is a big move. Combined with the revenue [from new models], we are confident that this is what it is going to take to get us going."
He dismissed suggestions that the plan was accelerated because of calls from some financial analysts for him to be replaced.
"We are not taking these actions because of any pressure on me, we are doing it because it is right for the business," he said.
GM will close assembly plants or production lines in Oklahoma City, Lansing in Michigan, Spring Hill in Tennessee, Doraville in Georgia, and Oshawa, Canada.
It will also cut shifts at plants in Moraine, Ohio, and at the remaining Oshawa plant, while four stamping, component and engine plants will shut. All should be completed by the end of 2008. - (Financial Times service)
