June 7 (Bloomberg) — General Motors Corp. Chief Executive Rick Wagoner said the world’s largest automaker will cut at least 25,000 U.S. manufacturing jobs in the next three years and close additional assembly and parts plants to cut costs.
The undisclosed plant closings will generate an estimated savings of $2.5 billion a year once complete, Wagoner said in a speech at the GM annual shareholder’s meeting in Wilmington, Delaware today.
GM has “a tremendous amount of overcapacity and fixed cost,” said Mirko Mikelic, a senior portfolio manager who oversees $14 billion in bonds at Fifth Third Asset Management in Grand Rapids, Michigan. “This is something he has to address.”
Wagoner is seeking to return the automaker to profitability following its biggest quarterly loss in 13 years and a 6.7 percent drop in U.S. sales this year. The company’s shares are down 24 percent so far in 2005.
Analysts including UBS Securities’ Robert Hinchliffe in New York said GM needs to cut as many as four plants to reduce capacity. The company has demand for 5 million of its cars and trucks, while its factories have the capacity to make 6 million. GM may make a decision on its plants in the next two quarters, according to New York-based Prudential Securities Inc. analyst Michael Bruynesteyn, who rates GM “neutral weight.”
The automaker cut North American production 12 percent in the first quarter and plans a 10 percent reduction this quarter. Another 9 percent drop is slated in the third quarter after U.S. sales in May fell for the fourth month in five this year.
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