CHICAGO (AFP) — General Motors, the leading US automaker, on Tuesday warned of "significant" losses in the second quarter and unveiled a fresh restructuring and cost-cutting program to battle slumping sales amid soaring gasoline prices.
GM said it "anticipates it will report a significant second-quarter loss, driven in part by the previously disclosed negative impact of the American Axle and local union strikes in North America, as well as the continued weakness in the US auto market and adverse vehicle segment mix."
These losses will be deepened as a result of "significant charges" GM expects to report in the second quarter related to a massive restructuring program initiated in 2005, recently announced plans to cut North American truck capacity, a new labor contract with Canadian workers and other one-off costs.
"We are responding aggressively to the challenges of today's US auto market," GM chairman and chief executive Rick Wagoner said in a statement.
"We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix."
GM said it plans to cut more white-collar jobs and further reduce truck production as part of a plan to improve its cash flow by 10 billion dollars by the end of 2009.
Sales of assets and fresh borrowing will boost liquidity to 15 billion dollars by 2009, GM said.
The automaker said it was also assuming its US market share would fall to 21 percent, with total industry sales falling sharply to 14 million vehicles in 2008 and 2009.
GM said it expected crude oil prices to remain in the 130-150 dollar a barrel range through 2009.
"Today's actions, combined with those of the past several years, position us not only to survive this tough period in the US, but to come out of it as a lean, strong and successful company," Wagoner added.
GM did not say how many non-union jobs it would eliminate but said it would cut its salaried employee costs by 20 percent through attrition, the elimination of executive bonuses and health-care coverage for retired workers over 65 and other measures.
GM has already cut its US workforce by more that 40,000 employees as it shuttered plants in the wake of losses which have topped 54 billion dollars since 2005.
The automaker reiterated plans to examine the potential sale of its gasoline-guzzling Hummer brand; Wagoner said GM would focus on "profit improvements" at its other brands.
Truck capacity will be slashed by 300,000 vehicles by the end of 2009, "half of which is from acceleration of prior announced actions, and half from new capacity actions," GM said.
The automaker said it intends to return to capital markets to raise its liquidity position which stood at 23.9 billion dollars at the end of the first quarter, in addition to a line of US credit of seven billion dollars.
GM also will cut its sales and marketing budgets, with a focus on "protecting launch products and brand advertising."
Planned increases to the engineering budget will be eliminated with spending held at 2006-2007 levels.
"These operating actions, combined with the benefits of the 2007 GM-UAW (United Auto Workers union) labor agreement, are targeted to reduce North American structural cost from 33.2 billion dollars in 2007 to approximately 26-27 billion dollars in 2010, a reduction of six to seven billion," GM said.
"We hope today's actions are sufficient to get us through the downtrend but there are no guarantees," Wagoner said in a conference call with reporters.
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