GM has been losing market share to Toyota and sees $1,500 per vehicle go to health care costs.
When GM chairman and CEO Rick Wagoner spoke in Wilmington, DE, at the annual shareholder meeting, he spoke of plant closings and job cuts as measures to bring production capacity in line with demand. GM lost $1.3 billion USD in the first quarter.
GM doesn’t have a firm timetable for the changes it wants to make, but the cuts will definitely affect hourly workers in the US between now and 2008.
It’s a tough story for states to swallow, as they see the prospect of businesses connected to the Detroit automaker being knocked down like dominoes too. Dozens of suppliers depend on orders from GM, and when those orders vanish, so will the suppliers.
According to the Indianapolis Star, the job cuts won’t happen fast. GM’s aging workforce loses 5 to 7 percent per year to retirement. In a three year period, GM could shed about 20,000 jobs through attrition. Since Mr. Wagoner has proposed that his job cuts take place over the next three years, it appears the company simply won’t fill jobs that become open this way.
GM’s plan still has to pass the union test. The United Auto Workers union just finished accepting Ford’s restructuring plan with supplier Visteon. The prospect of giving ground to GM as well may not happen as smoothly as Mr. Wagoner would like.
The union’s position on skyrocketing health care costs has been to resist passing costs along to its workers. Instead, it feels health care reform on a national level will be a better solution to the problem. GM’s earlier attempts to get the union to renegotiate health care were rejected by union head Ron Gettelfinger.
Whatever happens with health care reform, the cost cutting that Mr. Wagoner craves will need approval from the UAW. Union contracts don’t allow for the automakers to simply shutter plants and push through massive layoffs.
Of course, the union may not be dealing with Mr. Wagoner in the long term. Billionaire Kirk Kerkorian may fulfill all the speculation about his acquisition of GM shares by launching a takeover. That would leave the unions to deal with Mr. Kerkorian instead.
Mr. Wagoner may think the unions would prefer not to have to negotiate with Mr. Kerkorian. The proposal put forth Tuesday would push back discussions on health care costs to sometime between now and the expiration of the current union contracts in 2007.
David Utter is a staff writer for murdok covering technology and business. Email him here.
