The shift in the U.S. auto market has finally compelled General Motors Corp., the largest local car maker to take new actions to fight through the current economic challenges. The automaker is trying to deal with the shift in the U.S. market and will improve through 2009 by its new restructuring plan, GM said on Tuesday morning in a press conference.

The restructuring plan as announced by the officials, includes laying off some white-collar workers, reducing health care coverage for white-collar retirees, making more cuts in truck production, suspending dividends, eliminating executive bonuses. These changes are expected to raise GM cash by about $15 billion, by the end of 2009, the company said.

GM CEO, Rick Wagoner said, “We are responding aggressively to the challenges of today’s U.S. auto market,” he continued, “We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix. We remain committed to bringing to market great products that target changing consumer preferences for more fuel-efficient vehicles.”
 

Wagoner further added, “Today’s actions, combined with those of the past several years, position us not only to survive this tough period in the U.S., but to come out of it as a lean, strong and successful company.”

GM plans to make significant changes in work force. It plans employment reductions in the U.S. and Canada through attrition, early retirements, buy-outs and lay offs. The company will reduce its salaried employment costs by 20 percent or $1.5 billion.

In addition to this, GM will cut health-care coverage for white-collar retirees over 65 years old, effective January 1. Instead, they will receive a pension increase to help offset their costs. The company will also eliminate cash bonuses for executives. The employees will not receive compensation increases in the U.S. and Canada through 2009.

As far as the production line is concerned, GM plans to cut its truck production by 300,000 units by the end of 2009, which will reduce the company’s production cost by about $2.5 billion.

GM has already announced that it will suspend the production of trucks at its three North American truck plants in between 2009 and 2010. The Oshawa truck plant in Ontario is expected to close in 2009, whereas the Moraine truck plant in Ohio and truck production at its Janesville assembly plant in Wisconsin will close by 2010.

The Oshawa truck plant makes the Chevrolet Silverado and GMC Sierra pickups. The Moraine plant makes the Chevrolet TrailBlazer, GMC Envoy and Saab 9-7X SUVs. And the Janesville truck line makes the Chevrolet Tahoe, Chevrolet Suburban and GMC Yukon SUVs. 

GM is expected to improve liquidity by $800 million through 2009 by slashing the dividends on common stock. Along with it, the automaker is looking forward to improve another $4 billion to $7 billion through new financing and asset sales.

GM has already been reviewing its Hummer brand for sale and the company hopes, the sale of Hummer’s assets would generate about $2 billion to $4 billion in liquidity.

The decision to make changes, that are expected to put in action soon was obviously tough for the automaker.
 
“The actions announced today are difficult decisions, but necessary to respond to the current auto market conditions,” Wagoner said.

GM’s U.S. sales fell 18.2 percent in June, as compared with June 2007 and its total sales in the first half of this year were down 16.3 percent, compared to the same period a year ago.
Reportedly, truck sales fell 22.2 percent during the first half, while car sales dropped 8.2 percent.
In response to shifting demand of U.S. consumer from large pickups and SUVs to fuel-efficient smaller cars, GM will focus more on producing smaller engines and more fuel-efficient powertrains.

There were also issues about the company’s liquidity in recent weeks as the automaker’s stock price dropped below $10 to the lowest point in more than 50 years. Analysts speculated that GM would file for bankruptcy.

Wagoner last week told, “Even under conservative planning scenarios, GM is well positioned to withstand the U.S. market downturn and emerge a stronger company.”

In this concern Wagoner said on Tuesday, “We have a solid position in the rapidly growing emerging markets, a global operating framework that allows us to respond to changes in the U.S. market, a commitment to technology leadership, and an ever stronger and competitive product lineup.” 

GM said at the end of the first quarter 2008, GM had liquidity of $23.9 billion, with access to U.S. credit facilities of an additional $7 billion. Now, it has enough liquidity to meet its 2008 funding requirements, but it is taking these additional measures in case of a prolonged U.S. downturn.

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