GM to cut jobs, sell assets, raise cash to survive

General Motors Corp on Tuesday announced a plan to cut costs by $10 bln, suspend its common stock dividend and sell up to $4 bln in assets in a bid to shore up cash and survive a deep industry slump.
The hurried restructuring, GM's second in just six weeks, was forced by high fuel prices, a consumer shift away from low-mileage trucks, the weakest U.S. auto sales in a decade, and growing investor doubts about the automaker's ability to ride out the downturn.
GM, which has lost $51 bln over the past three years as it has cut jobs and closed plants, said the steps were aimed at addressing deepening concerns that have driven its stock price to 54-year lows and raised the cost of insuring its debt against default.
"What we saw was an even decidedly more hostile environment in the capital markets," GM President and Chief Operating Officer Fritz Henderson told reporters. "You saw financial markets almost seize up."
The automaker said it would cut white-collar costs by 20%, a step expected to mean the loss of thousands of jobs among the 40,000 salaried workers GM employs in North America.
GM shares rose nearly 7% on the restructuring news but remain down about 60% this year. Since Chief Executive Rick Wagoner took over in 2000, the shares have fallen about 80%.
Analysts said GM's plan, intended to raise $15 bln in liquidity through 2009, addressed the most urgent Wall Street concerns about pressure on its $24 bln in remaining cash.
But they cautioned that the company's turnaround still hinged on a recovery in the U.S. economy and on GM's ability to sell more fuel-efficient passenger cars, a market now dominated by foreign makers led by Toyota Motor Corp.
GM also has faced criticism for restructuring steps since 2005 that have consistently fallen short of what was required given the downward spiral in its results.
"We have to see better demand for automobiles, for cars and trucks, in order for the liquidity crisis to be put to bed," said Tim Ghriskey, chief investment officer at Solaris Asset Management in New York. "They're burning through about $3 bln in cash a quarter. The cash drain has to stop at some point or GM has larger problems."
GM said it would save $10 bln in cash through 2009 through a series of steps including cuts to white-collar jobs and retiree health-care and an elimination of executive bonuses for 2008.
Capital spending would be cut by $1.5 bln, and GM would accelerate plant closures announced last month, as it aims to move its vehicle line-up away from a reliance on SUVs and light trucks.
Moody's Investors Service on Tuesday described GM's initiatives as "constructive," but nonetheless placed its ratings on review for downgrade deeper into junk territory, citing challenges it faces in making up lost earnings from truck and SUV sales.
"The company will continue to face the significant challenge of building enough profitability in its car and crossover portfolio to make up for the earnings," Moody's said in a statement.