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Seeking to streamline its operations and avert bankruptcy, General Motors Corp. is overhauling its North American operations, with the automaker saying Monday it will cut 30,000 jobs and shut nine facilities. Detroit-based GM said the plan, which will result in a yet-to-be-announced restructuring charge, will help it save $7 billion in annual costs by the end of 2006, an increase of $1 billion over previous estimates. Company Chairman and CEO Rick Wagoner said in a statement that the cuts, while difficult, “are necessary for GM to get its costs in line with our major global competitors. In short, they are an essential part of our plan to return our North American operations to profitability as soon as possible.” The company, which faces eroding market share, plans to cut its assembling capacity by 1 million units annually by the end of 2008. The closures would be phased in over time, with facilities including its Doraville, Ga., factory not ceasing production until 2008. The announcement comes as GM scrambles to reduce costs, increase sales and regain the confidence of critics on Wall Street. One of these detractors, investor Kirk Kerkorian, has bought control of 9.9 percent of the company’s shares and is expected to demand a seat on its board of directors. GM, which also could be forced to assume upwards of $10 billion in benefits shed by former subsidiary Delphi Corp., which recently declared bankruptcy, has seen its shares hit new lows in recent weeks amid a growing chorus of skeptics who believe management will be unable to sidestep its own bankruptcy filing. The plant closures are only one step in the plan to restructure GM. The company has already won health care concessions from its unions that it expects will save it $1 billion annually and has struck a deal to sell a 60 percent stake in its commercial lending unit for $1.3 billion. GM is shopping a controlling stake in its Residential Capital Corp. mortgage unit, which could bring it as much as $12 billion in new liquidity. But many on Wall Street were not impressed. Banc of America Securities LLC analyst Ronald Tadross, who earlier this month said there was a 40 percent chance the company will be forced into Chapter 11 protection within two years, said GM must do more to avoid a filing. “This is not enough, especially considering that only three plants are really being closed, the [United Auto Workers] will need to be compensated to leave and this magnifies Delphi’s woes,” Tadross wrote in a note Monday. “At the end of the day, we think this will end up looking like the myriad of restructurings we have heard about from GM and Ford.” GM is shuttering three assembly plants, with the remaining facilities targeted for closure smaller metal centers and parts distribution centers. Of the three plants, Tadross notes that one is tiny and another is part of a larger facility, “so overhead will not come down that fast.” The announcement sets the stage for what figures to be tense discussions with the United Auto Workers, GM’s largest labor union. While GM can cease production at factories, under the terms of its labor agreements it must continue to pay workers even if the plant is closed. UAW officials released a statement Monday calling GM’s announcement “extremely disappointing, unfair and unfortunate,” saying that the cuts would be “devastating to many thousands of workers, their families and their communities.” The union said it would work to protect its members. “We have said consistently that General Motors cannot shrink itself to prosperity,” the union said. Indeed, by shrinking GM can only delay, and not solve, the larger issues that have been the cause of much of its troubles. The automaker needs to bring down costs in order to turn a profit on cars priced competitively against foreign rivals and revamp its designs to attract more people to the showroom. “I see no indication in what they have released today that they have addressed the fundamental structural issues that have brought them to this point,” said Peter Morici, a University of Maryland professor and an auto expert. Copyright �2005 TDD, LLC. All rights reserved.

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