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GM lays off several hundred salaried employees

General Motors Corp., pummeled by falling U.S. sales and billions in losses, said Tuesday that it is laying off several hundred U.S. salaried workers as part of a plan to bring its North American operations back to profitability.
/ Source: The Associated Press

General Motors Corp. laid off several hundred white-collar workers Tuesday as part of a plan to bring its ailing North American operations back to profitability.

It was the first round of salaried cuts this year for the world’s largest automaker which is struggling with sluggish sales, shrinking U.S. market share and high health and pension costs that put it at a competitive disadvantage against Asian rivals.

GM didn’t give an exact figure but said fewer than 500 jobs were cut Tuesday at 30 locations across the United States, including factories and engineering centers. A cut of just less than 500 jobs would represent about 1.3 percent of GM’s U.S. salaried work force of 36,000.

GM has said it plans to cut 7 percent of its salaried work force this year, or 2,500 jobs, so more cuts are on the way.

GM spokesman Robert Herta said the company hasn’t released a figure indicating how much it will save from the salaried layoffs.

GM shares fell 18 cents, to close at $22.75 on the New York Stock Exchange after rising as high as $23.25 earlier in the day.

Detroit-based GM announced a restructuring plan in November in the face of mounting losses. Under the plan, GM wants to cut 30,000 U.S. hourly workers and close 12 facilities by 2008. GM lost $10.6 billion in 2005, largely because of increased competition and rising costs in North America.

The layoffs are GM’s second major jobs-related announcement in a week. GM said last Wednesday that it would offer buyouts of between $35,000 and $140,000 to its 113,000 U.S. hourly workers. GM Salaried workers aren’t eligible for those buyouts.

Chuck Moore, a director at the Detroit restructuring management firm Conway, MacKenzie and Dunleavy, said he was surprised GM didn’t lay off more workers Tuesday.

“It’s critical for GM to get through the reductions as quickly as possible. This has been a distraction to the employees since November,” Moore said. “The longer this gets dragged out, the greater the chance there is that the most valued employees will walk out the door on their own and GM will have difficulties attracting new employees.”

Herta said GM’s timeline for layoffs is based on the requirements to run the business.

The size of GM’s salaried work force is similar to one of its key competitors, Ford Motor Co., which has around 35,000 salaried employees. But Ford is in the midst of its own restructuring, and Moore said GM can’t get complacent.

“They have to cut in every area possible,” Moore said. “The number of employees they have right now is still substantially higher than what their current market share will support.”

GM said Monday that it expects its U.S. market share will fall one percentage point in the first quarter to 24 percent, down from 32 percent a decade ago. The automaker also warned of continuing losses as it sells fewer vehicles to rental car fleets and relies less heavily on discounts to sell vehicles.

Dave Kepsel, an engineering manager who spent 26½ years at GM, was among those laid off Tuesday.

“I was told today I no longer have a job with GM,” said Kepsel, a 52-year-old from Lake Orion. Kepsel worked at the GM Technical Center in the Detroit suburb of Warren, a massive facility that employs 14,800 engineers, designers and others.

Kepsel said he wasn’t surprised by the layoffs and thought they might have come sooner because of GM’s struggles.

“It’s one of those things. It’s part of doing business. I don’t have any hard feelings,” he said.

Kepsel drove away in a Chevrolet Silverado, a company vehicle he’ll be allowed to keep for 30 days.

“At least they offered me that and didn’t make me walk home or take a taxi,” Kepsel said.

GM’s severance packages for salaried workers vary by position and level of experience, but employees generally receive one month of severance pay for each year of service at the automaker up to a maximum of 15 months. They also will continue to receive health benefits and will be eligible for outplacement assistance during that time, Herta said.

“We’re trying our best to treat these impacted individuals with dignity and respect,” Herta said.

GM has been steadily shrinking over the last few years as U.S. demand for its vehicles has fallen. The company had 44,000 salaried workers in 2000. GM reduced its salaried payroll by around 2,000 workers last year.

GM laid off 500 contract employees in January, many of them engineers and designers at its technical center in Warren. Contract employees do work for GM but are employed by another company. Tuesday’s layoffs only included GM salaried workers.