Human Capital & Careers

GM to Cut at Least 25,000 Jobs

Chairman and chief executive officer Rick Wagoner warned that the company also needs to reduce its health-care expenses, which add $1,500 to the co...
Stephen TaubJune 8, 2005

General Motors Corp. announced that it will eliminate at least 25,000 manufacturing jobs through 2008. This is the largest such reduction since Kmart’s January 2003 announcement that it would eliminate 37,000 jobs, according to placement firm Challenger, Gray & Christmas Inc.

The staff reductions, as well as plans to close additional assembly and component plants over the next few years, will generate annual savings of about $2.5 billion, according to the company. Speaking at GM’s annual meeting in Wilmington, Delaware, chairman and chief executive officer Rick Wagoner warned that the company also needs to reduce its health-care expenses, which add $1,500 to the cost of each GM vehicle.

This “represents a significant disadvantage versus our foreign-based competitors,” said Wagoner, according to a transcript of his address to shareholders. “Left unaddressed, this will make a big difference in our ability to compete in investment, technology, and other key contributors to our future success.” Speaking of the economy as a whole and noting that these high costs are not unique to GM, Wagoner asserted that “the health-care crisis is putting our future at stake … and so, we must act now.”

The world’s largest automaker has been “in intense discussions with the UAW and our other unions,” added Wagoner, focused on a cooperative approach to reduce the company’s health-care costs significantly.

In a statement, John A. Challenger, CEO of the placement firm, added: “Other companies, including the other American automakers, [are struggling] to make a profit amid escalating health-care costs, not to mention the cost of providing ongoing health benefits to the growing ranks of retirees. Unless companies can reduce these expenditures, they will have no choice but to make tough decisions such as the one just announced by GM’s chief executive.”

Indeed, GM was not the only company to announce sizable staff reductions yesterday.

ConAgra Foods Inc. — which warned that fiscal fourth-quarter earnings will be lower than expected, primarily due to continued weak profitability in the company’s packaged-meat operations — announced that it is “reducing general and administrative expense as well as salaried headcount.” ConAgra’s press release did not specify a number, but Reuters estimated the potential cuts at 1,000 salaried workers.

And Sears Holdings, which is still digesting the merger between Sears Roebuck and Kmart, disclosed in a regulatory filing that it has notified about 1,400 additional Kmart employees that their positions would either be eliminated, or they would be relocated to the Hoffman Estates, Illinois, headquarters or the Dallas transaction processing center.