GM struggles for comeback

Layoff of 30,000 might not be enough, analysts say

30,000 GM workers to be laid off


The sweeping plans announced by General Motors Corp. yesterday to close nine plants and cut 30,000 jobs over the next three years might not be enough to save a struggling company mired by higher costs than most of its competitors, industry experts said.

Though the announcement served as yet another harsh blow to struggling American automakers, some experts called the cutbacks a continuation of the company's decades-old problems.

They said U.S. automakers such as General Motors and Ford will never be able to compete against foreign companies such as Toyota unless those automakers figure out a more efficient way to build cars that consumers will buy.

"I think it's a step in the right direction," said Jack W. Plunkett, chief executive officer of Plunkett Research Ltd., a market research firm in Houston and publisher of Plunkett's Automobile Industry Almanac. "Would I be willing to say it's going to create a comeback? No."

General Motors has been losing a battle to foreign competitors with lower production costs, and it has been hindered by high health care and pension costs for its workers and retirees.

The company's bond rating has been cut to junk status and it has struggled with design problems. GM also has also bet much of its business on gas-guzzling sport utility vehicles, which rising oil prices have made less attractive to consumers.

"It just goes back for the last 20 to 30 years that they just weren't building enough cars and trucks at their factories that people wanted to buy," said Haig Stoddard, an analyst for, an automotive information company in Southfield, Mich.

In May, 1,100 people lost their jobs when GM closed its Baltimore van assembly plant after sales of the Chevy Astro and GMC Safari vans manufactured there dwindled. The closing had long been rumored because neither of the vehicles - the only products made at the Broening Highway plant since 1984 - had been remodeled in 20 years.

The plant closings announced yesterday are far more sweeping. But experts said those moves might not do enough to address the company's overarching costs.

"If suddenly their product line was of great interest to consumers, they still have an inherent cost problem that their competitors don't have," Plunkett said.

Last month, General Motors reported a $1.6 billion loss for the third quarter.

Yesterday, the company also said it would close three service and parts operations facilities, slashing its production capacity to 4.2 million vehicles by 2008. The move will cut GM's assembly capacity 30 percent from 2002. It is expected to save $7 billion a year by the end of 2006.

GM's move came days after Ford Motor Co. said that next year it would cut 4,000 jobs, or 10 percent of its North American work force. Meanwhile, experts say Japanese automakers such as Toyota are grabbing market share with more consumer-friendly, reliable products that are produced more efficiently.

"GM and Ford keep putting out the same boring cars that are almost as good as Japanese cars and almost as reliable and they're more costly to make," said Peter Morici, an economist and professor of business at the University of Maryland's Robert H. Smith School of Business.

DaimlerChrysler AG shares the burden of high blue-collar labor costs with GM and Ford, but experts say what is beginning to set Chrysler apart is that it can make cars more cost-effectively.

Morici said GM's cost problems reach beyond the factory floor, all the way to the boardroom.

"You've got a problem here in that you seem to have managers in both [GM and Ford] that are just not accountable," he said.

The 30,000 job cuts GM announced yesterday include 25,000 that were previously announced. It said it plans to close assembly plants or cut back shifts at plants in Oklahoma City; Lansing, Mich.; Spring Hill, Tenn.; Doraville, Ga.; Moraine, Ohio; and Ontario, Canada.

Service parts operations and power-train facilities to close include those in Lansing; Ypsilanti, Mich.; Pittsburgh; Portland, Ore.; Ontario; and Flint, Mich.

The company's Allison Transmission plant in White Marsh, Baltimore County, was not on the list of facilities slated to close.

"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," GM Chairman and Chief Executive Officer Rick Wagoner said in a statement.

"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."

The closings and cutbacks are the most recent sign of wider financial trouble at the automaker.

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