(Reuters) - General Motors Corp outlined steps on Friday to cut costs by an additional $5 billion, on top of the $15 billion in cash-generating plans it had announced in July as it warned of rapidly falling liquidity levels.
Reporting a worse-than-expected $4.2 billion operating loss and a $6.9 billion cash burn for the third quarter, GM said liquidity would fall short of the minimum needed to run its business by the first half of 2009 without new funding or other drastic action.
Following are details as to GM’s plans to free up $20 billion in liquidity through 2009.
* Reducing capital spending for 2009 by $2.5 billion from this year to $4.8 billion.
* Reducing salaried employment costs in North America by 30 percent, up from the earlier target of 20 percent, generating additional cost savings of $500 million.
: That will be in part achieved by total reduction of more than 7,000 salaried and contract employees in the United States and Canada, including involuntary separations if necessary.
* Will cut labor costs in Western Europe as well starting 2009.
* Reducing structural costs by $1.5 billion, by adjusting vehicle production schedules, sales and media promotion spending, reducing dealer network restructuring activities.
* Cutting $500 million by additional inventory reductions, cuts in components, buffer stocks and finished goods.
* Delaying select vehicle programs in North America and Europe by three to 12 months and deferring capacity expansion projects.
* Says key vehicle programs remain on track: The Chevrolet Cruze small car will be launched in 2010 as planned, while spending levels for the Chevrolet Volt plug-in car and other fuel-efficient initiatives have been increased.
* In response to declining demand, GM will scale back production at several operations in North America by slowing line speeds.
* Discretionary spending such as travel and nonscheduled overtime for hourly and salaried employees will be restricted.
* No incentive compensation for salaried employees in 2009 for the 2008 performance period. No discretionary cash bonuses for 2008 for executives.
* Warns that, even if GM implements the additional cost- cutting actions, its estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business. Says liquidity will “fall significantly short of that amount” in the first two quarters of 2009 without new government funding or other drastic action.
Updates on asset sales and borrowing through which GM is planning to raise a combined $5 billion through 2009.
* GM preparing to provide offering materials to parties interested in its Hummer SUV line, its ACDelco aftermarket parts business and its technical and manufacturing center in Strasbourg, France.
* Analyzing other potential asset sales.
* Says timing of the $2 billion to $3 billion of capital market financing GM initially targeted remains uncertain, as “the U.S. credit markets remain inaccessible and the contagion effect on other financial markets around the world provides limited alternatives.”
Reporting by Soyoung Kim; Editing by Andre Grenon