General Motors Corp. plans to reduce its annual U.S. labor costs by another $5 billion by 2011, the company said Thursday.
Chairman and Chief Executive Rick Wagoner said a good chunk of the reduction will come from the new contract agreement reached last year with the United Auto Workers.
The contract shifts the obligation for about $46.7 billion in retired UAW worker health care from the company to the union, with the company pouring billions into a trust fund run by the union. The trust, called a voluntary employees beneficiary association, takes over the health care obligation in 2010.
GM also anticipates that its spending on U.S. hourly and salaried pension and health care will drop from an average of $7 billion per year over the last 15 years to around $1 billion per year starting in 2010, the company said in a statement.
With the additional cuts, the company will have reduced costs “over an eight-year period, something like $12 billion, $13 billion,” said Wagoner, who was speaking to the Automotive Securities Analysts conference in Dearborn.
He also said that the upcoming contract bargaining with the Canadian Auto Workers union “presents an opportunity for us to improve our competitiveness in Canada.”
Chief Financial Officer Fritz Henderson told the analysts that the company expects U.S. light and heavy vehicle sales this year to be in the low 16 million range, down slightly from 2007.
He said the company expects to have $27 billion in liquidity at the end of 2007, enough to handle an economic downturn if it comes in the U.S.
GM has planned for, but is not anticipating, a downturn in U.S. sales to 15.4 million, he said. The company has the liquidity to handle such a downturn, Henderson told the analysts.
GM shares slipped a penny to $22.84 in trading Thursday.