General Motors said Tuesday it planned to offer voluntary buyouts to all 74,000 members of its union-represented US workforce as the struggling automaker posted its biggest annual loss ever.
GM reported Tuesday that it lost a record 38.7 billion dollars in 2007, mostly due to a writedown in tax credits in the third quarter that were expected to expire unused.
The employee buyouts would permit GM to make a further transformation of its workforce after years of painful reorganization in the face of eroding market share, especially in North America, by making room for a new class of lower-paid workers in its US plants.
GM said that while it expects to continue to grow its revenue globally in 2008, conditions in its home market are “challenging” and future job cuts could occur if conditions worsen.
“If they are going to be tougher (than expected), we'll take whatever actions we need to do to get our capacity in line with demand,” said Fritz Henderson, GM's chief financial officer.
The automaker expects to slash 4.5 to 5.5 billion dollars in costs by 2010 and could see revenues increase another 1.0 to 1.5 billion if the North American auto market returns to its previously robust demand, he said.
“In order to get North America sustainably profitable in generating cash we need to execute all of our structural cost actions and we need to win in the market,” Henderson said in a conference call.
“We've started to see some evidence of that in 2007, which is encouraging, but we need to frankly step on the gas in terms of how we're performing in the market.”
The White House on Tuesday expressed optimism about the auto industry over the long term, while noting that GM's loss was “significant.”
US carmakers are adjusting “in structural ways that can help keep them competitive in the future and we're confident that, over time, that they're going to be successful in doing that,” said spokeswoman Dana Perino.
Virtually all of the company's 2007 loss was the result of a massive accounting charge.
GM in the third quarter decided to write down the nearly 39 billion dollars in accumulated tax credits when it realized it might not be able to earn enough money to use them before they expire.
Excluding special items, GM's loss was a more modest 23 million dollars, or four cents per share, on revenues of 181 billion dollars.
In the fourth quarter, GM reported a net loss of 722 million dollars, or 1.28 dollars per share, with results affected by a variety of special charges and tax benefits.
Excluding special items, the results would translate to a profit of 46 million dollars, or eight cents a share, on revenues of 47.1 billion.
GM chief executive Rick Wagoner said 2007 was a year “of important progress for GM, as we implemented further significant structural cost reductions in North America, grew aggressively in emerging markets, negotiated an historic labor contract with our UAW partners in the US, advanced development of a broad range of advanced propulsion technologies and most importantly, introduced a series of breakthrough cars and trucks around the world.”
He added, “We're pleased with the positive improvement trend in our automotive results, especially given the challenging conditions in important markets like the US and Germany, but we have more work to do to achieve acceptable profitability and positive cash flow.”
Some 46,000 GM employees are currently eligible for the buyouts, Henderson said.
The company is offering buyouts of 140,000 dollars to employees with more than 10 years of service and 70,000 dollars to others.
GM is also offering early-retirement pension incentives of 45,000 dollars for production employees or 62,500 dollars for skilled trades workers. Eligible employees can select from a variety of ways to receive their incentive.
The offer is the second effort to reshape the workforce since 2006, when GM offered voluntary buyouts to its 113,000 workers, a plan accepted by 30,000.
GM shares closed down 1.92 percent at 26.60 dollars.
