| nickthaskater |
08-09-2006 10:36 AM |
GM moves to cut $1 billion from midsize car R&D
Quote:
Aug. 8 (Bloomberg) -- General Motors Corp., struggling to rebound from last year's multi-billion dollar loss, will reduce its annual costs to develop new midsize cars by $1 billion through sharing parts, designs and factories.
Plants in North America, Europe and elsewhere will use the same chassis on models such as the Chevrolet Malibu sedan and Saab convertibles, Jim Wiemels, who oversees GM's global production, said during a conference yesterday in Dearborn, Michigan. The change will reduce spending on new midsize cars by a third, or $1 billion a year, GM spokesman Dave Roman said.
``They have opened up everything to see what's available in the global parts bin,'' said Rebecca Lindland, an analyst at Global Insight Inc. in Lexington, Massachusetts, who forecasts vehicle sales. ``There is a more cohesive environment now.''
The plan is part of GM Chief Executive Officer Rick Wagoner's strategy for restoring profits after a $10.6 billion loss in 2005 and winning back buyers lost to competitors such as Japan's Toyota Motor Corp. He intends to reduce annualized spending by $9 billion at the end of 2006.
``Wagoner knows he's in charge of a company that some people still don't think is going to be around much longer,'' Lindland said.
GM, the world's largest automaker, said today that its future pension and health-care obligations fell a combined $23.2 billion after 34,400 union workers took incentives to leave early.
Dow Leader
Wagoner is shutting factories and cutting jobs to reduce excess capacity in a bid to return to profit. That has helped the company's shares rise 62 percent this year, outperforming a 1.1 percent gain in Toyota shares. GM's shares rose 15 cents to $31.55 at 12:06 p.m. in New York Stock Exchange composite trading.
GM's 8.375 note due in July 2033 rose .65 cent to 82.8 cents on the dollar, yielding 10.3 percent, according to Trace, the NASD's bond-price reporting service.
GM has been losing customers in the U.S. to Toyota and Honda Motor Co. as drivers choose smaller, more fuel-efficient cars instead of sport-utility vehicles and other light trucks. GM's U.S. sales fell 23 percent last month compared with Toyota's 12 percent sales gain for July. Honda gained 6 percent.
March 2005 Reorganization
GM's new midsize models, the Chevrolet Malibu, Saab 9-3 and Opel Vectra, will be the first developed under the March 2005 reorganization of GM's product development system. The Detroit- based automaker reassigned 11 executives and created three global positions to share more car designs across North America, Europe and Asia. GM also is developing common designs for future SUVs and small cars.
GM has 174 manufacturing facilities in 34 countries, including 77 assembly operations. The company plans to close 12 locations in North America by 2008.
Wagoner has said GM's capital expenditures will total about $8.7 billion this year, an increase from about $7.9 billion last year. The company is investing in factory upgrades for new car and truck models and building new plants outside the U.S., where sales are growing.
As an example, GM's plant in Russelsheim, Germany, will build seven different models, including convertible, station wagon and sedan variations, Wiemels said at the conference yesterday, which was sponsored by JPMorgan Chase & Co. The plan cuts engineering costs by 40 percent and material costs by 15 percent, he said.
Worker Buyouts
Separately, about 20,000 of the 34,400 union workers who accepted either a retirement incentive or a buyout this year have already left the automaker, Wiemels said at the conference, which is also sponsored by manufacturing efficiency firm Harbour Consulting.
As a result of the departure of the union workers, GM cut its $89 billion U.S. pension obligation by $3.9 billion and trimmed its estimate for future spending on retiree health care by $19.3 billion, according to a U.S. regulatory filing today. GM has the largest pension obligation in the Standard & Poor's 500 Index.
The lower estimates factor in the smaller workforce, health- care cuts for union workers and changes in benefits for salaried employees, GM said. The company's spending obligations also were reduced by the higher discount rate it used to calculate future expenses.
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