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GM unveils job and cost cut plans GM unveils job and cost cut plans
(10 minutes later)
US carmaker General Motors (GM) has announced it will cut white collar employment costs by 20% as it seeks to counteract falling sales.US carmaker General Motors (GM) has announced it will cut white collar employment costs by 20% as it seeks to counteract falling sales.
GM also said it would sell as much as $4bn (£1.9bn) of assets, and borrow about $2bn to bolster its finances.GM also said it would sell as much as $4bn (£1.9bn) of assets, and borrow about $2bn to bolster its finances.
The largest US carmaker said it would also suspend its common stock dividend.The largest US carmaker said it would also suspend its common stock dividend.
GM and other carmakers are under pressure because of high fuel prices and a dip in demand for larger cars such as sports utility vehicles (SUVs).GM and other carmakers are under pressure because of high fuel prices and a dip in demand for larger cars such as sports utility vehicles (SUVs).
In the first half of 2008, truck sales sank 21%, while overall sales fell 16%.In the first half of 2008, truck sales sank 21%, while overall sales fell 16%.
GM is the US's top-selling carmaker, but this year its share price has plummeted by more than 60% as investor confidence in the company has dissipated.GM is the US's top-selling carmaker, but this year its share price has plummeted by more than 60% as investor confidence in the company has dissipated.
NightmareNightmare
GM chief executive Rick Wagoner said he was confident that the new plans would give the company the boost it needed for the future.GM chief executive Rick Wagoner said he was confident that the new plans would give the company the boost it needed for the future.
It expects that the measures will free up about $15bn by the end of 2009.
In a broadcast to employees, Mr Wagoner said GM had a "solid, well thought out plan" to raise profitability.In a broadcast to employees, Mr Wagoner said GM had a "solid, well thought out plan" to raise profitability.
He added it was "not a plan to survive, but a plan to win".He added it was "not a plan to survive, but a plan to win".
But analysts were more cautious. Mirko Mikelic, a senior portfolio manager at Fifth Third asset management, said the measures were defensive.But analysts were more cautious. Mirko Mikelic, a senior portfolio manager at Fifth Third asset management, said the measures were defensive.
"Now they are reacting to events and things are really coming to a head. Right now auto sales are at recession levels," said Mr Mikelic."Now they are reacting to events and things are really coming to a head. Right now auto sales are at recession levels," said Mr Mikelic.
"GM has so many problems to deal with, it is just an absolute nightmare. They are right in the thick of all the issues in the United States. Throw in gas and energy prices on top of that and it is just very difficult to see anybody being successful in that position," he said."GM has so many problems to deal with, it is just an absolute nightmare. They are right in the thick of all the issues in the United States. Throw in gas and energy prices on top of that and it is just very difficult to see anybody being successful in that position," he said.
Tim Ghriskey, chief investment officer of Solaris Asset Management said the plans would ensure GM a few more years' survival, but higher demand for its products would be needed to put the liquidity crises "to bed".Tim Ghriskey, chief investment officer of Solaris Asset Management said the plans would ensure GM a few more years' survival, but higher demand for its products would be needed to put the liquidity crises "to bed".
"They're burning through about $3bn in cash a quarter. The cash drain has to stop at some point or GM has larger problems," said Mr Ghriskey."They're burning through about $3bn in cash a quarter. The cash drain has to stop at some point or GM has larger problems," said Mr Ghriskey.
StreamliningStreamlining
Last month, GM announced the closure of four truck and SUV factories in North America and Mexico, and said it would increase production of smaller more fuel-efficient cars.Last month, GM announced the closure of four truck and SUV factories in North America and Mexico, and said it would increase production of smaller more fuel-efficient cars.
But this did little to reassure investors and last week GM's share price reached its lowest level in more than 53 years.But this did little to reassure investors and last week GM's share price reached its lowest level in more than 53 years.
Recently one US investment bank warned it was "not impossible" that GM would go bankrupt, although GM boss Rick Wagoner dismissed the forecasts as "not at all accurate or constructive".Recently one US investment bank warned it was "not impossible" that GM would go bankrupt, although GM boss Rick Wagoner dismissed the forecasts as "not at all accurate or constructive".
Some analysts have predicted GM will need to raise $15bn (£7.4bn) to ride out the downturn in car and truck sales.Some analysts have predicted GM will need to raise $15bn (£7.4bn) to ride out the downturn in car and truck sales.
GM says it has $31bn in cash, which will be enough for this year without further borrowing.GM says it has $31bn in cash, which will be enough for this year without further borrowing.
But Wall Street says if GM does want to borrow more, it will have to make more progress in cutting its costs.But Wall Street says if GM does want to borrow more, it will have to make more progress in cutting its costs.
GM is also under pressure to streamline its output further and cut some of the eight different brands it currently produces.GM is also under pressure to streamline its output further and cut some of the eight different brands it currently produces.
"There are too many automotive nameplates out there and too many brands at GM. Rationalising that product line-up should help them," said Mr Ghriskey."There are too many automotive nameplates out there and too many brands at GM. Rationalising that product line-up should help them," said Mr Ghriskey.
The firm has already said it is looking at selling its well-known Hummer SUV brand, but so far it has not released details of its plans for its other brands.The firm has already said it is looking at selling its well-known Hummer SUV brand, but so far it has not released details of its plans for its other brands.