North American readers are probably getting GM-Bankruptcy updates in their news coverage on a daily basis. Euro readers less so. Here in Australia we have more pressing matters at hand, like how the hell did that blond chick win Australian Idol last night???
For those of you that are a little slower on the uptake, the Sydney Morning Herald has a good article on the state of play so far. (Thanks PT for the link).
For those that want the L-L-L-Latest, GM’s latest 4-point plan is posted over the jump.
GM North America to Undergo Major Capacity Reduction
Next Significant Step in GM’s North American Turnaround Plan
9 Assembly, Stamping & Powertrain Facilities, 3 SPO Facilities to Cease Operations
Total Reduction of 30,000 Positions
Total Cost Reduction Running Rate of $7 Billion by End of 2006
DETROIT – General Motors will undergo a wide-ranging restructuring of its manufacturing operations in the United States and Canada as part of its comprehensive four-point plan to return the company to profitability and long-term growth, GM Chairman and CEO Rick Wagoner announced today.
GM’s next step in its North American turnaround plan addresses its ongoing capacity utilization, a major component of reducing structural cost. A total of nine assembly, stamping and powertrain facilities and three Service and Parts Operations facilities will cease operations.
The additional actions will reduce GMNA assembly capacity by about 1 million units by the end of 2008, in addition to the previously implemented reduction of 1 million units between 2002 and 2005. Factoring in the additional capacity from GM’s new Delta Township facility in Lansing, Mich., slated to begin production next year, the overall net result will be a GMNA assembly capacity of 4.2 million units. While down 30 percent since 2002, this capacity level will still provide GM plenty of flexibility to anticipate and meet market demand, but in a much more cost-effective manner. A total of 30,000 manufacturing positions will be eliminated from 2005 through 2008.
“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 added. “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.
“We continue to be equally committed to revenue drivers – introducing compelling new cars and trucks, and executing our revitalized sales and marketing strategy – and we have received ratification of the agreement with the UAW, which will help significantly to address our health-care cost challenges,” Wagoner said. “We are making steady and significant progress in implementing the plan to turn around our U.S. business.”
The following six assembly plant sites will be affected in the years indicated:
Oklahoma City, Okla., will cease production in early 2006.
Lansing, Mich., Craft Centre will cease production in mid-2006.
Spring Hill, Tenn., Plant/Line No. 1, will cease production at the end of 2006.
Doraville, Ga., will cease production at the end of its current products’ lifecycle in 2008.
The third shift will be removed at Oshawa Car Plant No. 1, in Ontario, Canada, in the second half of 2006. Subsequently, Oshawa Car Plant No. 2 will cease production after the current product runs out in 2008.
The third shift will be removed at Moraine, Ohio, during 2006, with timing to be based on market demand.
Capacity-related actions affecting stamping, Service & Parts Operations and powertrain facilities include:
The Lansing, Mich., Metal Center will cease production in 2006.
The Pittsburgh, Pa., Metal Center will cease production in 2007.
The Parts Distribution Center in Portland, Ore., will cease operations in 2006; the Parts Distribution Center in St. Louis, Mo., will cease warehousing activities and will be converted to a collision center facility in 2006; the Parts Processing Center in Ypsilanti, Mich., will cease operations in 2007. One additional Parts Processing Center, to be announced at a later date, will also cease operations in 2007.
The competitiveness of all unitizing (packaging) operations at the Pontiac, Drayton Plains, and Ypsilanti Processing Centers in Michigan, as well as portions of the unitizing operations at the Flint, Mich., Processing Center will be evaluated in accordance with the provisions of the GM-UAW national agreement.
St. Catharines Ontario Street West powertrain components facility in Ontario, Canada, will cease production in 2008.
The Flint, Mich., North 3800 engine facility (“Factory 36”) will cease production in 2008.
Given the demographics of GM’s workforce, the company plans to achieve much of the job reduction via attrition and early retirement programs. GM will work with the leadership of its unions, as any early retirement program would need to be mutually agreed upon. GM hopes to reach an agreement on such a plan as soon as possible.
“These are difficult moves that will affect thousands of dedicated GM employees and families, as well as state and local governments,” Wagoner said. “We will work our hardest to mitigate that impact.”
There will be a significant restructuring charge in conjunction with this capacity announcement, and also with any related early retirement program. The details of these charges will be provided when available.
Wagoner also said the company has further accelerated its efforts in structural cost reduction, raising the previously indicated $5 billion running rate cost reduction plan in North America to $6 billion by the end of 2006. In addition, GM continues to pursue its plans to target $1 billion in net material cost savings. In total, the plan is to achieve $7 billion of cost reductions on a running rate basis by the end of 2006 – $1 billion above the previously indicated target.
“Our collective goal remains the same: to return our North American operations to sustained profitability as soon as possible, thereby helping to ensure a strong General Motors for the future,” Wagoner concluded.
GM North America’s Four Point Turnaround Plan
Following is a brief update and summary of the other key elements of the GMNA turnaround plan beyond structural cost reductions (above).
Health-care Cost Reductions
On Oct. 17, GM announced a far-reaching agreement with the UAW that will introduce a series of changes to the hourly retiree health-care plan. As part of the agreement, pending court approval, active hourly employees will contribute financially to this health-care plan. As a result, GM will continue to provide competitive health-care benefits to its hourly employees and retirees, but at a significantly lower cost. The agreement is projected to reduce GM’s retiree health-care liabilities by approximately 25 percent of the hourly liability, or about $15 billion, and cut the company’s health-care expense by about $3 billion on an annualized, pre-tax basis. Annualized cash savings will be approximately $1 billion a year.
GM North America will continue with its aggressive product assault on all vehicle segments. To target key growth segments with the right products, GM earlier this year increased capital expenditures, with the vast majority of that increase going toward future car and truck programs. This increased investment will allow GM to average 15 all-new entries a year in the North American market for the foreseeable future.
We remain committed to a diversified portfolio of hybrid cars and trucks, including hybrid versions of the Saturn VUE, Chevrolet Malibu, and the next generation of GM full-size pickups and SUVs. We also will continue to lead in the implementation of other fuel savings technologies, such as Displacement on Demand and six-speed transmissions. GMNA also will expand its offerings of ethanol-capable vehicles (E85 fuel).
To help drive additional sales in the future, the product plan includes a heavy emphasis on high-growth segments, such as “crossovers,” compact and luxury SUVs, large pickups and entry luxury cars.
Starting in January, GM will begin rolling out more than a dozen all-new versions of its full-size SUVs for Chevrolet, GMC and Cadillac, to be followed in late 2007 with the availability of GM’s advanced two-mode hybrid powertrain. In the same year, GM will begin rolling out an entire new lineup of full-size pickups, another segment in which GM is the industry leader.
GM’s strategy also builds on its recent move to create a single, global product development organization, which will permit the company to better leverage its considerable design and engineering resources around the globe. By taking full advantage of its unique global footprint and that of its global partners, GM will more effectively be able to address emerging trends and markets, and take advantage of its creative talent base around the world.
Sales & Marketing
GM also laid out a focused strategy designed to improve significantly the company’s performance in the retail marketplace.
This strategy includes strengthening GM’s automotive brands, marketing that emphasizes the inherent value of GM cars and trucks, completing GM’s distribution channel strategy, and aggressively targeting markets where GM has underperformed against the competition.
GM’s newest products continue to attract new customers. Chevrolet introduced two new cars this year that rank among the top 10 best-selling cars in the industry: the Impala and Cobalt. The Buick LaCrosse is conquesting sales at impressive rates with 24 percent of its customers citing Toyota, Honda and Nissan as second choice and 50 percent claiming a non-GM brand as a second choice. The Pontiac G6 retail sales in October were up 100 percent versus October 2004. And the HUMMER brand has posted the largest percent increase (up 86 percent in 2005) of any GM division, with the H3’s successful launch.
GM brands have focused more on consumer benefits in advertisements this year, moving away from the deal-only ads that focused largely on monthly payments. For instance, Chevrolet ads spend more time addressing segment-leading fuel economy, safety and product quality.
The dealer-channel strategy is progressing well. There are over 200 Chevrolet dealers implementing the brand’s image program. At HUMMER, over 70 percent of the dealerships will be consistent with that brand’s image vision by the end of 2005. Cadillac has nearly 200 dealerships completed or in progress, representing 60 percent of the brand’s sales, and nearly all Saab dealerships are consistent with that brand’s image vision. By the end of 2005, 60 percent of Pontiac, Buick and GMC sales will be from combined dealerships.
As part of the move toward emphasizing the value of GM cars and trucks, GMNA will continue to adjust suggested retail prices to more closely match actual transaction prices, manage inventories and resale values more closely, and focus strongly on improving retail sales.
In addition, GM will specifically address certain regional markets in the United States in which GM’s potential has not been fully realized. This more targeted approach to incentives, advertising, and promotion is expected to result in significant volume and share gains in these markets.