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...increasingly unstable U.S. economy and rising gasoline prices, General Motors Corp. has unleashed another huge wave of budget and financial cuts that the company's top executives described as a "self-help" plan designed to stave off any potential "liquidity crisis." The cutbacks appear to involve every level of GM's operations, including shedding the Hummer and decreasing its support for NASCAR. Said GM's chairman and chief executive officer Richard Wagoner: "Conditions are extremely unsettled. We're trying to protect the enterprise long-term. We're going to have to ride this out for a while...
...based on very conservative assumptions that oil prices will hover in the $130-to-$150-per-bbl. range through 2009, while car sales will fall to an annual rate of about 14 million units this year and next - a level last seen during the recession of the 1990s, when GM controlled just under one-third of the U.S. market. GM is still the nation's largest carmaker, but its market share is down to about 22% and its stock price has dropped to its lowest level in more than half a century, having fallen from the $20-per-share range...
Industry watchers were alarmed last week when Wagoner had to insist that the company was not considering bankruptcy. Ray Young, GM's chief financial officer, conceded that the company will post a "significant" loss when it reports its second-quarter earnings, but, he told TIME after the announcement of the latest cuts, the talk about bankruptcy was "unfortunate." He said, "It's a distraction. We wanted to dispel any concerns anyone might have. Frankly, that's just not in the cards...
...list of new cuts included the elimination of the dividend on common stock, all executive bonuses and, with the apparent approval of the United Auto Workers (UAW) union, health-care coverage for salaried retirees over the age of 65. In addition, GM plans to launch a new wave of buyouts among its 32,000 salaried employees while freezing their salaries for the remainder of 2008 and 2009. The benefit cuts and early retirements are expected to reduce GM's salary costs by 20%, saving the company $1.5 billion by the end of 2009, GM executives said...
...company's engineering and capital spending are also being cut, freezing development of new trucks and SUVs. Marketing budgets will also be trimmed, including as yet unspecified support for motorsports such as NASCAR. GM is also planning to defer a $1.7 billion payment to the special trust created last year to cover the cost of health care for retired blue-collar workers; it would also expedite the shutdown of four truck plants originally announced at the company's annual meeting in June. GM plans to raise another $4 billion to $7 billion by selling off assets like its Hummer brand...