General Motors Corp. on Friday said it is moving ahead with structural and material cost-cutting this year in a move to staunch losses in North America as quickly as possible.
The world’s largest automaker expects to realize about $4 billion in savings in 2006 of the previously identified targeted savings of $7 billion — comprised of $6 billion in structural costs and $1 billion in material costs.
“Our primary focus in North America this year is to fully and rapidly implement our turnaround plan, which focuses on the areas that can quickly improve our results and ... fundamentally enhance our long-term competitiveness,” Chief Executive Rick Wagoner said in a meeting with analysts in Dearborn, Michigan.
“We expect to see improved results in 2006 and further progress in 2007,” he added.
An adviser to Kirk Kerkorian, GM’s largest investor, said this week the automaker needs to operate in “crisis mode.” Jerome York urged GM to cut its dividend in half, reduce executive pay and shed “noncore” auto brands Saab and Hummer.
Wagoner repeated on Friday GM is operating with urgency to turn around its money-losing North American operations.
As part of the next phase of cost-cutting, GM said it is now aiming to lower its global structural costs as a percentage of revenue to 25 percent in 2010 from the current level of about 34 percent.
The company said it would not provide a 2006 financial forecast, citing the ongoing talks between the United Auto Workers union, Delphi Corp. and GM; the timing of implementing the health care agreement with the union; and the potential actions related to its financing arm, General Motors Acceptance Corp.
The Detroit-based automaker said it expects another record year for global auto sales in 2006, driven by growth in Asia Pacific.
GM said new products will also help its turnaround. About 29 percent of GM’s North American sales volume this year is expected to come from recently launched cars and trucks, as well as upcoming new models.
By 2007, GM, which introduced a new pricing strategy this week in a move to reduce its reliance on incentives, said it expects more than 30 percent of its sales volume to come from the new vehicles.
Also on Friday, GMAC said it would take a charge of about $450 million after partially writing down assets bought in 1999.
GM expects GMAC, which had about $20 billion in cash at the end of last year, to post “solid” results in both 2005 and 2006.
The automaker said it continues to explore the possible sale of a controlling interest in GMAC to a strategic partner with the goal of of restoring the business’s investment-grade credit rating.
GM also said its U.S. hourly and salaried pension plans were about $6 billion overfunded at the end of 2005, due largely to preliminary asset returns of 13 percent in 2005. For this year, GM’s assumed rate of return on assets remains unchanged at 9 percent.