AP source: GM likely to announce more production cuts, possible closures as early as next week
DETROIT (AP) -- General Motors Corp. is likely to announce further production cuts and possible plant closures as early as next week as it deals with slumping sales and a collapse in its stock price, a person with knowledge of the company's plans said Friday.
The person, who did not want to be identified because the plans are not finalized, said the cuts likely will hit engine, transmission and stamping operations to correspond with a June announcement that GM would close four truck and sport utility vehicle assembly plants.
The closures of those assembly plants likely will be accelerated, the person said. GM announced last week that its Moraine, Ohio, SUV factory will close Dec. 23, and it has said it will idle assembly factories in Oshawa, Ontario; Toluca, Mexico; and Janesville, Wis., by 2010.
Chairman and CEO Rick Wagoner said last month that GM would have to make adjustments, particularly in metal stamping factories.
Further cuts could shore up GM's share price, which lost nearly half its value this week, plunging to the lowest level in 59 years. The shares fell 31 percent to $4.76 Thursday and dropped to $4 in the first minutes of trading Friday, the lowest level since Nov. 16, 1949, according to the Center for Research in Security Prices at the University of Chicago. They rebounded to end six straight losing sessions and close at $4.89, up 13 cents, or 2.7 percent.
Industry analysts say closing factories or cutting shifts will help GM reduce costs and preserve cash at a critical time with the company losing billions and burning up cash at an alarming rate.
GM had $21 billion in cash and $5 billion available through credit lines at the end of June for total liquidity of $26 billion but has been burning up cash at a pace of more than $1 billion a month.
The company announced a plan in July that calls for cutting $10 billion in costs and raising another $5 billion through asset sales and borrowing through 2009.
Mark Warnsman, an auto analyst with Calyon Securities, said further production cuts are consistent with what GM and other automakers have been doing all year -- cutting factory capacity to match lower sales.
"I think it's a positive sign that GM is biting the bullet," he said. "For GM going forward, they're going to have to use everything available to them."
So far this year, GM's U.S. sales have sank with the overall market. Through September, GM sold 18 percent fewer vehicles than it did in the same period last year. U.S. auto sales overall are down 13 percent through September, and J.D. Power and Associates on Thursday reduced its projections to 13.6 million this year and 13.2 million in 2009, down from 16.1 million units in 2007.
Rumors and fear of cuts have been circulating through GM factories for months, especially those that make parts for trucks.
"Everybody's a little bit concerned, I'm sure they are," said Bob Allard, who helps to build four-speed automatic truck transmissions at GM's Willow Run facility, about 35 miles west of Detroit.
GM is relying more and more on six-speed transmissions to make its trucks more fuel-efficient, and industry analysts have said plants making four-speeds are vulnerable. Also vulnerable are those making large V-8 engines for trucks, as well as plants that stamp out truck parts.
GM has been shifting its truck-heavy lineup to satisfy a market leaning toward smaller, more fuel-efficient vehicles. The company has increased production of small and midsize cars, plans to start building the new compact Chevrolet Cruze in 2010, and is building a new plant in Flint, Mich., to make four-cylinder engines for the Cruze and the Chevrolet Volt electric car.
Last month, Wagoner would not say if more factories will be closed or if GM would merely reduce shifts or assembly line speeds. But analysts and automakers have said it's not efficient to run factories on only one shift, which GM is doing in many locations.
Warnsman said he would not be surprised if there are further plant closures.
"It's tough to be surprised by anything in the present market," he said. "I think we're at a point here where we're talking about cutting off limbs to save the body."
There's little hope for an immediate U.S. sales rebound.
The Edmunds.com automotive Web site on Friday predicted October sales will be worse than September, which was the worst month in 15 years. Traffic on the Edmunds site, which it says correlates strongly with actual sales, shows a 20 percent decline in the first week of October compared with the first week of September.
GM's shares dropped 31 percent Thursday, fueled by a statement from Standard & Poor's Ratings Services, which said the "rapidly weakening state" of the global automotive market could push GM's credit further into junk status, making it even tougher to borrow money.
GM said in a statement Friday that while it faces "unprecedented challenges" related to the ongoing problems in the financial markets and weakening economies across the globe, it still doesn't consider bankruptcy protection as an option.
"Bankruptcy would not be in the interests of our employees, stockholders, suppliers or customers, and we believe speculation about a possible filing is exaggerated and unconstructive," GM said.
The bankruptcy talk and market conditions are disconcerting to the 1,600 workers at GM's Toledo, Ohio, transmission factory, said Ray Wood, president of the United Auto Workers local there.
Although his plant makes a six-speed truck transmission and is scheduled to get a six-speed car gearbox, Wood says GM recently shut down a four-speed truck transmission line and laid off 190 workers.