GM to lay off 3,500

Cuts to be made at truck and SUV factories

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By Matthew Stephens

General Motors (GM) announced last week that it would be cutting one shift at four of its factories that produce trucks and SUVs. The cuts will be made at the facilities in Flint and Pontiac, Michigan, as well as Oshawa, Ontario, and Janesville, Wisconsin.

Totaling 3,500, the cuts represent a little over 4 percent of GM’s 80,000 employees in North America. The laid off employees will receive 80 percent of their previous 40 hour pay. Final numbers for the cuts and compensation still must be worked out with the union.

The reduced production will mean 88,000 fewer trucks and 50,000 fewer large SUVs this year.

In a statement, GM North America President Troy Clarke said, "With rising fuel prices, a softening economy and a downward trend on current and future market demand for full-size trucks, a significant adjustment was needed to align our production with market realities."

Gasoline price increases have accelerated an already established trend – a movement from pickup trucks and SUVs to crossovers and cars. GM has not seen such a marked trend in car sales.

GM reported earnings last week as well, reporting a loss of $3.25 billion for the first quarter, which actually beat estimates. Excluding one-time items, GM lost $350 million this quarter, compared to $10 million a year ago. GM’s revenue dipped only slightly to $42.7 billion, with 20 percent growth in overseas sales.

Investors certainly were not flummoxed by the news, with both the lay-offs and losses (although less than predicted) in the spotlight, the stock rose about 12 percent following the earnings announcement. GM stock has been very volatile lately, although investors seem to be bullish with the prospects of a potential recovery of the world’s largest automobile manufacturer.

Originally Published: Issue 607 - May 6, 2008

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