Huge losses, cuts expected at GM

Detroit News staff and wire reports

General Motors Corp. will report its third-quarter earnings Friday, and cuts are expected at various levels to try and curtail future losses.

The company is spending billions more than it’s making amid the worst economic crisis in decades and struggling to obtain financing because of its sub-investment grade, or junk, bond status.

The chief executives from GM and Ford, as well as Chrysler LLC, were lobbying legislators in Washington, D.C., on Thursday trying to impress upon them the need for federal aid.

GM has said recently that factory production needs to reflect declining sales, which typically means job cuts.

The automaker is reportedly planning to announce factory closures, although it is likely to cut production by eliminating shifts, overtime bans or temporary plant shutdowns.

GM also is expected to slow its product development schedule, delaying some models and engines at least for a short time.

"I haven’t heard nothing specific, but we are worried," James Kendall, president of UAW Local 23, which represents workers at GM’s parts stamping factory in Indianapolis said recently. "Absolutely, we’re worried. Who knows what’s going to happen?"

According to an internal e-mail obtained by The Detroit News sent to company executives Monday, CEO Rick Wagoner and President and Chief Operating Officer Fritz Henderson will announce changes to employees at 11 a.m. Friday that address challenges "brought on by the volatile global economic situation."

It is not spelled out in the e-mail what specific changes might be announced. But late last month, Wagoner and Henderson wrote in another letter to executives that the automaker will have to cut more white-collar jobs later this year and early next year, including involuntary layoffs, suspend the company match in employee 401(k) retirement accounts and make other benefit cuts.

GM’s sales in the United States are down 20.3 percent this year and the automaker has lost approximately $70 billion since 2004.

GM and other automakers are coping with the lowest U.S. sales market in 17 years.

The worsening auto market has led GM to enter negotiations to acquire rival Chrysler LLC from majority owner Cerberus Capital Management LP. One deal on the table is for GM to sell a majority of its 49 percent interest in GMAC Financial Services in exchange for Chrysler. Cerberus, which owns 51 percent of GMAC, could keep a small stake in a combined GM-Chrysler.

GM shares closed Thursday at $4.80, down 76 cents or 13.7 percent. Ford shares closed at $1.98, down 11 cents, or 5.3 percent.