GM To Close 9 Plants, Cut 30K Jobs

Automaker Is Struggling With Losses, Profits, Market Share

(CBS/AP)  General Motors Corp. announced plans Monday to cut 30,000 manufacturing jobs and close nine North American assembly, stamping and powertrain facilities by 2008 as part of an effort to get production in line with demand.

Rick Wagoner, chairman and CEO of the world's largest automaker, announced the closures during a speech to employees from GM's Detroit headquarters before the financial markets opened. Wagoner said GM also will close three service and parts operations facilities.

"The decisions we are announcing today were very difficult to reach because of their impact on our employees and the communities where we live and work," Wagoner said. "But 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."

"General Motors has far too many plants and far too many people right now for the number of cars they're selling," Keith Crain, editor in chief of Automotive News, told CBS Radio News.

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GM CEO Rick Wagoner announces the cuts

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GM said the plan is to achieve $7 billion in cost reductions on a running rate basis by the end of 2006 — $1 billion above its previously indicated target. The number of job cuts also was above earlier estimates. GM said earlier this year it planned to cut 25,000 jobs by 2008, mostly through attrition.

GM could still have a great future, but "you've got to shrink to grow," David Cole of the Center for Automotive Research told CBS Radio News. "You've got to get to a base that's a sustainable base, and they are not there right now."

GM said the plants that will close are in Oklahoma City, Lansing, Mich., Spring Hill, Tenn., Doraville, Ga., and Ontario, Canada.

An engine facility in Flint, Mich., will close, along with a powertrain facility in Ontario and metal centers in Lansing and Pittsburgh.

Parts distribution centers in Ypsilanti, Mich., and Portland, Ore., also will close, as well as one other to be announced later. A shift also will be removed at a plant in Moraine, Ohio.

Wagoner said last month the automaker would announce plant closures by the end of this year to get its capacity in line with U.S. demand.

"Our overriding message here is that for GM North America to be successful, we need to continue working both sides of our four-point turnaround plan, cost and revenue," Wagoner said Monday.

GM plants currently run at 85 percent of their capacity, lower than North American plants run by its Asian rivals. The plant closings aren't expected to be final until GM's current contract with the United Auto Workers expires in 2007.

GM has been crippled by high labor, pension, health care and materials costs as well as by sagging demand for sport utility vehicles, its longtime cash cows, and by bloated plant capacity. Its market share has been eroded by competition from Asian automakers led by Toyota Motor Corp. GM lost nearly $4 billion in the first nine months of this year.

The automaker could be facing a strike at Delphi Corp., its biggest parts supplier, which filed for bankruptcy protection last month. GM spun off Delphi in 1999 and could be liable for billions in pension costs for Delphi retirees.

GM also is under investigation by the U.S. Securities and Exchange Commission for accounting errors.

Last week, after the automaker's shares fell to their lowest level in 18 years, Wagoner sent an e-mail to employees saying the company has a turnaround strategy in place and has no plans to file for bankruptcy.