GM Cuts white-collar Workforce By 14% February-10 2009

General Motors said on Tuesday it was cutting its global white-collar workforce by 14 per cent as it copes with a plunge in worldwide vehicle sales and prepares to present a restructuring plan to the US government.

The carmaker also said it was cutting its US salaried workers’ pay temporarily by up to 10 per cent as of May 1.

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Most of the job cuts would also take place by May 1, GM said.

GM said it was cutting its executives’ base pay by 10 per cent, and that of many of its other salaried employees by 3 to 7 per cent.

The carmaker said that the laid-off employees would receive severance payments, benefit contributions and outplacement assistance.

“These difficult actions are necessitated by a severe drop in vehicle sales worldwide and by the need to restructure GM for long-term viability,” the company said in a statement.

GM’s sales plunged by 49 per cent in the US in January.

The carmaker’s other global operations were currently reviewing their pay and benefits for salaried employees, GM said.

Sales of cars in overseas markets, until recently a buffer for GM’s declining US business, have fallen sharply in recent months.

RL Polk, a Michigan-based consultancy, estimated on Tuesday that global light vehicle sales will fall to 56.8m this year, a 13 per cent drop from 2008. It expects US sales to fall by another 19 per cent this year, following a 17 per cent decline in 2008.

Even in Asia, which was expected to cushion the industry, Polk expects sales to fall to 12.4m vehicles a year from 13.3m in 2008, excluding Japan.

GM, which is receiving $13.4bn of emergency bridge loans, pledged to cut its white-collar staff in a restructuring plan submitted to Congress in December. The job cuts announced on Tuesday mark the beginning of “implementation of this aspect of the plan,” GM said.

GM and Chrysler are in talks with bondholders and the United Auto Workers’ union aimed at cutting their fixed costs as they prepare viability plans to present to the government by February 17.

These talks are currently at the due diligence stage. Congress has asked the two carmakers to reduce their debt by two-thirds and bring their labour costs down to those of their Asian competitors as the price of bail-out aid. Chrysler is receiving $4bn from the US government.

Shares in GM added 3 cents to $2.86 in early New York trading. The stock has fallen sharply from its 52-week high of $27.84, reached last November.

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