Rick Wagoner Special Employee Broadcast on Manufacturing Restructuring Actions.
In mid-October, we announced that we had reached a tentative agreement in cooperation with the UAW which will help significantly to address the fourth item, health care costs. The UAW advised us about ten days ago that this agreement has been ratified, and we are now pursuing court approvals in line with our plan. When implemented during 2006, this agreement will result in an approximate $15 billion, or 25%, reduction in our hourly post retirement health care obligation; a reduction in our health care expense by $3 billion on an annualized basis; and annualized cash flow savings of $1 billion. This is an historic step; going forward, we’ll need to continue to work proactively on further measures to control the health care cost inflation that affects all of us.
Today, we are announcing further reduction of an additional one million units of capacity by 2008, involving six assembly sites. When you factor in additional capacity from our new Lansing (MI) Delta Township facility slated to begin production next year, the overall net result will be GMNA assembly capacity of 4.2 million units, on a two-shift basis, by the end of 2008. While down 30% in total since 2002, this capacity level will still provide ample flexibility to meet market demand, but in a much more cost-efficient manner.
At the Annual Meeting in June, I indicated that we would have a reduction in manufacturing employment levels of 25,000 or more by 2008. With the plans I’ve just outlined, we estimate in fact that the reductions will now total 30,000 manufacturing jobs over the same time frame.
As we finalize our 2006 budgets, we have been pursuing all areas to reduce cost in GM North America. Based on this work, plus the capacity actions announced today and the recent health care agreement, we plan to raise the previously indicated $5 billion running rate structural cost reduction target in North America to $6 billion by the end of next year. In addition, we continue to finalize our previously announced plans for a $1 billion in net material cost savings. In total then, we plan to achieve $7 billion of cost reductions on a running rate basis by the end of 2006 -- $1 billion above the target indicated during the third quarter earnings broadcast.
We are very encouraged that our newest products -- the Chevy Impala, Cobalt and HHR; Hummer H3; the Cadillac DTS; the Pontiac Solstice; and the Buick Lucerne, among others -- are being very well received by customers and media alike. And our new full-size SUVs, starting with the Chevy Tahoe, will be available in dealerships in January. Our overriding message here is that for GMNA to be successful, we need to keep working both sides of our four-point turnaround plan -- cost and revenue. You’ll hear more about our revenue initiatives, and especially new products, at the Detroit Auto Show early next year.
In addition, we are continuing to explore the sale of a controlling interest in GMAC, in order to restore GMAC’s investment grade rating, and renew its access to low-cost funding. We are also working to minimize any negative effects of the Delphi bankruptcy. We will update you on these important items when we have news to report.
Our collective goal remains the same: to return our North American operations to sustained profitability as soon as possible, thereby helping to ensure a strong General Motors for the future.
GM North America to Undergo Major Capacity Reduction
Next Significant Step in GM's North American Turnaround Plan
9 Assembly, Stamping & Powertrain Facilities, 3 SPO Facilities to Cease Operations
Total Reduction of 30,000 Positions
Total Cost Reduction Running Rate of $7 Billion by End of 2006
DETROIT - General Motors will undergo a wide-ranging restructuring of its manufacturing operations in the United States and Canada as part of its comprehensive four-point plan to return the company to profitability and long-term growth, GM Chairman and CEO Rick Wagoner announced today.
GM's next step in its North American turnaround plan addresses its ongoing capacity utilization, a major component of reducing structural cost. A total of nine assembly, stamping and powertrain facilities and three Service and Parts Operations facilities will cease operations.
The additional actions will reduce GMNA assembly capacity by about 1 million units by the end of 2008, in addition to the previously implemented reduction of 1 million units between 2002 and 2005. Factoring in the additional capacity from GM's new Delta Township facility in Lansing, Mich., slated to begin production next year, the overall net result will be a GMNA assembly capacity of 4.2 million units. While down 30 percent since 2002, this capacity level will still provide GM plenty of flexibility to anticipate and meet market demand, but in a much more cost-effective manner. A total of 30,000 manufacturing positions will be eliminated from 2005 through 2008.
The following six assembly plant sites will be affected in the years indicated:
Oklahoma City, Okla., will cease production in early 2006.
Lansing, Mich., Craft Centre will cease production in mid-2006.
Spring Hill, Tenn., Plant/Line No. 1, will cease production at the end of 2006.
Doraville, Ga., will cease production at the end of its current products' lifecycle in 2008.
The third shift will be removed at Oshawa Car Plant No. 1, in Ontario, Canada, in the second half of 2006. Subsequently, Oshawa Car Plant No. 2 will cease production after the current product runs out in 2008.
The third shift will be removed at Moraine, Ohio, during 2006, with timing to be based on market demand
Capacity-related actions affecting stamping, Service & Parts Operations and powertrain facilities include:
The Lansing, Mich., Metal Center will cease production in 2006.
The Pittsburgh, Pa., Metal Center will cease production in 2007.
The Parts Distribution Center in Portland, Ore., will cease operations in 2006; the Parts Distribution Center in St. Louis, Mo., will cease warehousing activities and will be converted to a collision center facility in 2006; the Parts Processing Center in Ypsilanti, Mich., will cease operations in 2007. One additional Parts Processing Center, to be announced at a later date, will also cease operations in 2007.
The competitiveness of all unitizing (packaging) operations at the Pontiac, Drayton Plains, and Ypsilanti Processing Centers in Michigan, as well as portions of the unitizing operations at the Flint, Mich., Processing Center will be evaluated in accordance with the provisions of the GM-UAW national agreement.
St. Catharines Ontario Street West powertrain components facility in Ontario, Canada, will cease production in 2008.
The Flint, Mich., North 3800 engine facility ("Factory 36") will cease production in 2008.
Given the demographics of GM's workforce, the company plans to achieve much of the job reduction via attrition and early retirement programs. GM will work with the leadership of its unions, as any early retirement program would need to be mutually agreed upon. GM hopes to reach an agreement on such a plan as soon as possible.
Wagoner also said the company has further accelerated its efforts in structural cost reduction, raising the previously indicated $5 billion running rate cost reduction plan in North America to $6 billion by the end of 2006. In addition, GM continues to pursue its plans to target $1 billion in net material cost savings. In total, the plan is to achieve $7 billion of cost reductions on a running rate basis by the end of 2006 - $1 billion above the previously indicated target.
General Motors Corp. (NYSE: GM), the world's largest automaker, has been the global industry sales leader since 1931. Founded in 1908, GM today employs about 325,000 people around the world. It has manufacturing operations in 32 countries and its vehicles are sold in 200 countries. In 2004, GM sold nearly 9 million cars and trucks globally, up 4 percent and the second-highest total in the company's history. GM's global headquarters are at the GM Renaissance Center in Detroit.
Source is www.gm.com
I've extracted this from GM CEO Rick Wagoner's Speech and a news report.
This is for all Businessmen, Accountants, Business Administrator and other relevant ppl. I know this might be a tiring exercise to read it out but I've tried a lot to cut it down to just figures only.
Kindly comment on this and share your views that can this restructuring really help GM in brining it back to its Mighty position?
Regards,
ALLAH HAFIZ.
Wiki
P.S sorry if i jumbled up these two reports.