GM shutting down plants, slashing 25’000 jobs

GM shutting down plants, slashing 25’000 jobs

In what is sure to send ripples coursing throughout the economy and various dependent industries, General Motors Corp. today announced it will close more US assembly and component plants over the next several years. GM has been facing increasing shrinking profit margins due in large to soaring raw materials, fuel, and health costs. GM lost $1.1 billion in the first quarter 2005 and is currently mired in its worst financial crisis in more than a decade. For the past four years, GM has been closing plants and aims to slash its annual production from 6 million vehicles in 2002 to 5 million by the end of this year. The beleaguered automaker is also facing overwhelming competition from foreign automakers. In 2004, it is reported that GM utilized 85% of its North American plant capacity while Toyota Motor Corp. used 107%. The plant shutdowns are expected to trim 25’000 jobs from GM’s workforce from 2005 to 2008. GM is also engaged in discussions with the United Auto Workers union about reducing the immense cost of health insurance GM pays for each employee. The automaker recently revealed that for each vehicle it produces, it pays out approximately $1500 in health costs. Much depends on the company’s ability to turn itself around. General Motors accounts for 1% of the US’s Gross Domestic Product; is in someway responsible for more than 1.1 million jobs; and is one of the US steel industry’s biggest customers - buying nearly 98% of the steel it uses from domestic steelmakers. Overall, the cost saving measures are hoped to save GM $2.5 billion a year.