GM to Cut Staff 10 Percent Dec 12 11:22am ET

DETROIT (Reuters) - General Motors Counced it will cut its salaried North American work force by 10 percent.

Oldsmobile, which makes the Alero small car and the Aurora sedan, has offered hefty consumer incentives in recent months, but sales have declined nonetheless.

Oldsmobile sales in the core U.S. market have slid in recent years despite major investments in new products. They were expected to reach their lowest level in more than 40 years in 2000.

The No. 1 automaker also said it expects to earn $550 to $600 million, or $1.10 to $1.20 per share, in the fourth quarter. Analysts polled by First Call/Thomson Financial expected $1.70 a share.

For the full year, GM expected consolidated net income of $4.9 billion to $5.0 billion, or $8.47 to $8.57 per share. Analysts expected a full-year profit of $9.02.

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-- Martin Thompson (mthom1927@aol.com), December 12, 2000

Answers

GM Warns on Earnings, Scraps Oldsmobile Tuesday December 12, 12:27 PM EST By Michael Ellis DETROIT (Reuters) - The world's largest automaker, General Motors Corp. (GM), said on Tuesday it would miss profit forecasts and would cut its North American and European salaried workforce by 10 percent and phase out the venerable Oldsmobile brand, in a new sign of trouble in Detroit.

In a sweeping announcement from its world headquarters, Chief Executive Rick Wagoner said GM now expected fourth-quarter earnings per share would be only $1.10-$1.20, down from previous analyst expectations of $1.70 a share.

It was the latest sign of trouble for the U.S. economy from the auto industry, which has been slashing production and profit forecasts because of slowing sales. Both DaimlerChrysler AG (DCX) (DCXGn) and Ford Motor Co. (F) had previously warned of lower profits, and all three major U.S. automakers had slashed production schedules.

In its announcement, GM cited weaker vehicle sales, price pressure in key European markets such as Germany and losses at Japanese carmaker Isuzu.

GM also lowered its earnings expectations for the full year to between $8.47 and $8.57 per share from previous analyst expectations of $9.02.

The new earnings forecasts exclude an after-tax charge of $900 million to $1.5 billion, or about $1.60-$2.75 per share -- $1.5 to $2.5 billion before taxes -- to cover costs associated with the phase- out of Oldsmobile and the job cuts.

The company also said it expects to report a fourth-quarter after-tax gain on the previously announced sale of a Hughes Satellite unit to Boeing Co. (BA) for $1.2 billion.

GM's share price was up $2-5/16 per share at $53-7/8 after the announcement, slightly above its year low of $48-7/16 and compared with a year high of $94-5/8.

In phasing out Oldsmobile, GM is relegating to the history books the oldest automaker in the industry -- it was founded in 1897 by Ransom E. Olds in Lansing, Michigan -- and one of its most beloved names with classic models of the past such as the Olds Cutlass and Olds 88.

"This is a very difficult decision for us," Wagoner said. "But in the current environment, we simply couldn't find an approach that would ensure Oldsmobile's future success."

GM tried in recent years to retool the Oldsmobile brand with the Alero small car and the Aurora full-size sedan. But the brand still suffers a holdover image of making gas-guzzling cars for older people, analysts said.

U.S. Oldsmobile sales were down 18.5 percent for the first 11 months of this year to 265,828 units, despite some hefty consumer incentives.

In October, GM began offering a "triple-zero" incentive of zero down payment, zero monthly payment and zero interest for a year, to try to boost sales. But sales continued to fall.

Oldsmobile would be the second historic U.S. car brand to be phased out in the past year. DaimlerChrysler last year announced plans to kill the Plymouth brand, which was created in 1928 to battle Ford in the economy car segment. ©2000 Reuters Limited.

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-- Martin Thompson (mthom1927@aol.com), December 12, 2000.

BBC

Tuesday, 12 December, 2000, 15:26 GMT Vauxhall to close UK car plant

General Motors has decided to close its Vauxhall car plant in Luton, Bedfordshire, with the loss of about 2,500 jobs.

The plant had been thought to be one of the most secure in the UK.

About 500 of the workers are expected to be transferred to Vauxhall's neighbouring factory making vans, which is not affected.

BBC industry correspondent Stephen Evans says that General Motors in Detroit decided to close the car plant as it reorganises its worldwide operation.

Bolt from the blue

The problem is that the demand for the Vectra, which is made at the plant, is low, and GM has decided to concentrate production of the Vectra's replacement on the continent, primarily in Germany but also in Holland.

The jobs will go over the next 15 months, with workers offered a "very reasonable" redundancy package.

Chairman Nick Reilly said the decision was necessary to retain competitive manufacturing in the UK.

UK government ministers are already prepared for political fall-out - although Vauxhall is not believed to see the high value of the pound against the euro as a factor in the decision.

"Vauxhall's announcement of job losses at Luton is a bitter blow for the individuals affected, their families and the local community," said trade and industry secretary Stephen Byers.

"Our key aim will be to find new job opportunities to replace those being lost over the next year."

Ford has already decided to stop making cars at Dagenham in Essex.

It is understood that Ford's decision prompted General Motors executives to look more closely at a British plant closure, believing that it might be politically acceptable.

Professor Garel Rhys, of Cardiff Business School, said Vauxhall had voiced concerns about sales but had given no hint of taking such drastic action: "It is a genuine bolt out of the blue".

Union leaders reacted with disbelief to the news and said they would campaign to keep car production at Luton.

"We will fight tooth and nail to maintain car assembly," said Duncan Simpson, national officer of the Amalgamated Engineering and Electrical Union.

Tony Woodley, national officer of the Transport and General Workers Union, said there was "absolutely no need" for Vauxhall to end car production at Luton.

Industry weakness

"There is no valid reason for there to be any talk of this plant closing. It is yet another example of how companies see the UK as an easy place to sack workers," he said.

The factory was opened in 1905 - and is at the heart of the local community.

The ending of car production and subsequent job losses will come as a massive blow to the region and ends a difficult year for car manufacturers in the UK.

In addition to the ending of car production at Ford's factory in Essex in 2002, with the loss of thousands of jobs, loss-making Rover also shed thousands of jobs after it was sold by BMW.

Car firms, facing industry-wide overcapacity in Europe, have been hit by the strength of the pound against the euro when exporting UK-made cars to continental Europe.

John Edmonds, general secretary of the GMB union, said: "This is rapidly turning into UK manufacturing's blackest week.

"In the last 24 hours more than 3,500 jobs have been lost in shipbuilding, textiles and car manufacturing.

"The Government must act to prevent the high level of the pound squeezing the life out of Britain's manufacturing heartlands."

-- Rachel Gibson (rgibson@hotmail.com), December 12, 2000.