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GM to cut a further 21,000 jobs GM to cut a further 21,000 jobs
(about 2 hours later)
General Motors (GM) is to cut a further 21,000 US jobs this year and phase out its Pontiac brand, as it aims to meet a 1 June deadline to revamp its business.General Motors (GM) is to cut a further 21,000 US jobs this year and phase out its Pontiac brand, as it aims to meet a 1 June deadline to revamp its business.
GM has to complete its restructuring by that date to gain the extra multi-billion dollar government loans it needs to avoid bankruptcy protection. GM has to complete its restructuring by then to gain the government loans it needs to avoid bankruptcy protection.
After shedding Pontiac by the end of 2010, GM will focus on its Chevrolet, Cadillac, Buick and GMC brands.
The firm also said it hoped to halve its debts by persuading bondholders to swap $27bn (£19bn) of bonds for shares.The firm also said it hoped to halve its debts by persuading bondholders to swap $27bn (£19bn) of bonds for shares.
GM also wants the government to swap half its current loans for a 50% stake.GM also wants the government to swap half its current loans for a 50% stake.
The government has so far given GM $15.4bn in loans.The government has so far given GM $15.4bn in loans.
Shares in General Motors rose 24%, or 40 cents, to $2.09 after the announcement.Shares in General Motors rose 24%, or 40 cents, to $2.09 after the announcement.
Nostalgia
GM's chief executive Fritz Henderson said the decision to eliminate Pontiac had been tough because of the 83-year-old brand's heritage.
The brand was known for models including the Firebird and the Trans Am.
And its GTO model was the inspiration behind songs by the Beach Boys and Ronny and the Daytonas.
But Mr Henderson said GM had just not been able to make Pontiac work.
"We didn't think we had the resources to get this done from a product perspective," he said.
Falling salesFalling sales
GM said it also wants its main union, the United Auto Workers, to accept shares in the firm in exchange for cancelling 50% of the $20bn the firm must pay into a union-run healthcare trust. GM said it also wanted its main union, the United Auto Workers, to accept shares in the firm in exchange for cancelling 50% of the $20bn the firm must pay into a union-run healthcare trust.
The Pontiac brand has been in existence since 1926The Pontiac brand has been in existence since 1926
The carmaker said it would phase out the Pontiac brand by the end of the year in order to focus on four brands in the US - Chevrolet, Cadillac, Buick and GMC.
GM also said it would reduce the number of its US dealerships by 42% from 6,246 in 2008 to 3,605 by the end of 2010.GM also said it would reduce the number of its US dealerships by 42% from 6,246 in 2008 to 3,605 by the end of 2010.
"This reduction in US dealers will allow for a more competitive dealer network and higher sales effectiveness in all markets," GM said in a statement."This reduction in US dealers will allow for a more competitive dealer network and higher sales effectiveness in all markets," GM said in a statement.
After all the proposed changes, existing GM shareholders would own only 1% of the firm.After all the proposed changes, existing GM shareholders would own only 1% of the firm.
GM has already cut 10,000 US jobs this year, announced in February. Following the completion of the latest 21,000 reductions, its American workforce will be reduced to 40,000.GM has already cut 10,000 US jobs this year, announced in February. Following the completion of the latest 21,000 reductions, its American workforce will be reduced to 40,000.
'New path''New path'
Like US rivals Ford and Chrysler, GM has seen sales fall sharply in its core home market in recent years, a decline that has intensified as the recession has continued.Like US rivals Ford and Chrysler, GM has seen sales fall sharply in its core home market in recent years, a decline that has intensified as the recession has continued.
The White House's car industry taskforce said it welcomed GM's latest announcements, but added that the government had yet to make a decision regarding the carmaker's proposal that it exchange half the current loans for a 50% stake in the firm.The White House's car industry taskforce said it welcomed GM's latest announcements, but added that the government had yet to make a decision regarding the carmaker's proposal that it exchange half the current loans for a 50% stake in the firm.
"The interim plan that GM laid out in this filing reflects the work GM has done since 30 March to chart a new path to financial viability," it said in a statement."The interim plan that GM laid out in this filing reflects the work GM has done since 30 March to chart a new path to financial viability," it said in a statement.
"We will continue to work with GM's management as it refines and finalises this plan and with all of GM's stakeholders to help GM restructure consistent with the president's commitment to a strong, vibrant American auto industry.""We will continue to work with GM's management as it refines and finalises this plan and with all of GM's stakeholders to help GM restructure consistent with the president's commitment to a strong, vibrant American auto industry."