Auto workers fret as Ford, GM cuts expected Friday as sales decline
Tom Krisher And James Prichard, THE ASSOCIATED PRESS
DETROIT - With their employers poised to announce billions more in losses and further job cuts on Friday, it's worry time once again at General Motors Corp. (NYSE:GM) and Ford Motor Co. (NYSE:F) factories across North America.
Both companies are spending billions more than they're making amid the worst economic crisis in decades.
Both companies say that factory production needs to reflect declining sales, which means job cuts.
According to Ford's top sales analyst and two people briefed on GM's plans, neither automaker is planning to announce factory closures, although they are likely to cut production by eliminating shifts, overtime bans or temporary plant shutdowns. The people did not want to be identified because GM's plans are confidential.
GM also is expected to slow its product development schedule, delaying some models and engines at least for a short time.
GM has already cut thousands of jobs and closed several North American plants as it copes with a sharp slump in its business. In Canada, the company has announced plans to shut down pickup truck plant in Oshawa, east of Toronto, next fall, with a loss of 2,600 jobs.
GM has also targeted a transmission plant in the southwestern Ontario community of Windsor for closure in 2010, with the loss of about 1,400 jobs.
"We're watching with anxiety," Ken Lewenza, president of the Canadian Auto Workers union, said Thursday.
"I'm hoping that they're not going to announce more layoffs because we've suffered. I'd prefer temporary layoffs, temporary shutdowns in lieu of anything permanent until this darn economy turns around."
Both automakers, though, are expected to report huge losses when they release third-quarter results on Friday morning, a day after their CEOs travelled to Washington to make the case for federal aid for the industry.
"I haven't heard nothing specific, but we are worried," said James Kendall, president of UAW Local 23, which represents workers at GM's parts stamping factory in Indianapolis. "Absolutely, we're worried. Who knows what's going to happen?"
Kendall's concerns were echoed at Ford and GM factories elsewhere as workers braced for cuts and waited to learn if the U.S. government will toss their companies a lifeline.
Industry analysts say Ford and GM likely are spending around US$1 billion per month above their revenue. With credit markets frozen and junk credit ratings, both have had difficulty borrowing more money, raising the prospect that they could run short of cash.
Barclays Capital analyst Brian Johnson on Thursday estimated that GM burned through $4.2 billion of cash in the third quarter and will end 2008 with $15.9 billion.
With no sales improvement expected next year and without government aid, Johnson expects GM's cash balance to fall to $5 billion next year, "below the company's $14 billion minimum working cash needs."
Johnson estimated that Ford burned $2.3 billion of cash last quarter and will end 2008 with $20.1 billion, but unlike GM, it will get through 2009 without reaching the minimum required to run the company. With no sales improvement next year, Johnson expects Ford's cash balance to remain above the $10 billion minimum, he wrote in a note to investors.
GM sales were down 45 per cent in October and 20 per cent through the first nine months of the year, according to Autodata Corp., while Ford sales were off 30 per cent last month and 19 per cent through October. Overall, October U.S. sales were down 32 per cent, and October's seasonally adjusted annual sales rate was the worst in 25 years.
Automakers blame tight credit markets and shaken consumer confidence.
Things are so bad that top executives from GM, Ford and Chrysler LLC, as well as the United Auto Workers union, travelled to Washington Thursday to seek additional U.S. aid to help them survive.
George Pipas, Ford's top sales analyst, said the company already has cut a lot of truck and sport utility vehicle production and will announce cuts at some car and crossover plants on Friday.
"I'm not going to worry about things I can't control, but definitely I'm concerned," said Jeff Carter, vice-president of a UAW local that represents 4,200 workers at a Ford truck, car and stamping complex in Wayne, Mich., near Detroit. "If the banking industry doesn't loan the customers money, there will be nobody to sell products to no matter what you've got to offer."
Ford shed 3,000 workers with another round of buyout and early retirement offers to factory workers mainly in Ohio and Michigan. The offers expired last week, but more cuts may be needed.
Ford's top manufacturing executive told union officials in September that Ford has 4,200 more blue collar workers than it needs.
With the new cuts, Ford has shed around 41,000 hourly workers since 2006, mainly through early retirement and buyout offers. With the new cuts the company will have about 42,000 hourly workers in the U.S.
GM, which also has undergone a dramatic reduction of its factory work force with buyouts and early retirement offers, had about 125,000 U.S. hourly employees in 2003 and expects that to be 62,500 by the end of this year.
GM has been talking to Cerberus Capital Management LP, the majority owner of Chrysler LLC, about acquiring Chrysler. GM is reportedly seeking Chrysler's US$11 billion in cash and federal aid to make the deal happen.
Such a deal could lead to widespread layoffs if the two companies consolidate operations.
A report last week said seven of 14 Chrysler plants could be shut down in a merger of the two automakers.
In Canada, the two companies have a combined workforce of about 30,000 - 20,000 at GM Canada and 10,000 at Chrysler Canada - and operate assembly and parts plants across southern Ontario.
"Canada is sitting on the sidelines doing nothing," said Lewenza. "One thing I know, regardless of what they do in the United States, you've got to believe they're concentrating on U.S. plants and U.S. needs. I'm frustrated for the lack of information and it's only increasing the frustration and insecurities that we've felt for the last three or four years."
GM shares closed Thursday at $4.80, down 76 cents or 13.7 per cent. Ford shares closed at $1.98, down 11 cents, or 5.3 per cent.
[ 2008-11-06 ]
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