GENERAL Motors Corp, battling three years of losses, said it will suspend its stock dividend, cut salaried jobs and sell assets to increase its available cash by at least US$15 billion through 2009.
A 20-percent reduction in cash costs for salaried workers will save US$10 billion, and eliminating the 25-cent quarterly dividend will save US$800 million, GM said in a statement yesterday. The company will trim production and spending and raise US$4 billion to US$7 billion through asset sales and new bank loans.
"We are responding aggressively to the challenges of today's US auto market," Chief Executive Rick Wagoner said in the statement. "We will continue to take the steps necessary to align our business structure with the lower vehicles sales volumes and shifts in sales mix."
The moves may help Wagoner, 55, counter claims that the weakest United States auto demand in more than a decade puts GM at risk of bankruptcy. Merrill Lynch & Co said on July 2 that GM may need to raise US$15 billion and bankruptcy is "not impossible" should sales continue to deteriorate. GM is trying to raise US$2 billion to US$4 billion in additional liquidity with asset sales and US$2 billion to US$3 billion of new financing secured by assets such as foreign subsidiaries, brands and its stake in the GMAC LLC finance unit, Bloomberg News said.
The Detroit-based auto maker will reduce capital spending by US$1.5 billion to about US$7 billion next year, and will boost working capital by about US$2 billion in North America and Europe by paring raw-material use and its inventory of unused parts.
GM, turning 100 this year, reported its largest annual loss in 2007, US$38.7 billion, after a tax accounting change, and hasn't posted a profit since 2004.
The auto maker's US market share hovers at the lowest level since 1925, and its stock is trading at 54-year lows.
Since Wagoner became CEO in June 2000, GM has cut its US salaried workforce to 32,000 from 44,000. On June 3, Wagoner said GM would close four truck plants by 2010 to eliminate 700,000 units of North American production capacity while boosting output of fuel-efficient small cars.
He said last week that GM isn't considering bankruptcy and doesn't plan to eliminate vehicle brands beyond a possible sale or shutdown of the Hummer line of sport-utility vehicles.
GM's 16-percent US sales decline through June has exceeded the industry's 10-percent fall. Sales of pickups, sport-utility vehicles and vans - the vehicles most affected by rising gasoline prices - are down 21 percent in the period. The company relies on light trucks for about 60 percent of its US volume.
"GM is certainly going to be looking to bring a higher number of fuel-efficient vehicles to the US," said Efraim Levy, an equity analyst at Standard & Poor's in New York. "They have some good small-car products in South Korea and in South America that they could bring here sooner."
At the current pace, US auto sales may plunge to 14.5 million units for 2008, the lowest in 15 years, according to Deutsche Bank AG.
GM has said it is delaying plans to design future large pickups and SUVs and is studying whether to bring a car to its home market that is smaller than any currently sold.
Besides the minicar, GM is weighing a list of options for refocusing its auto lineup on fuel efficiency rather than performance, people familiar with those plans said this month.