General Motors Corp. said Tuesday that it would eliminate 25,000 U.S. manufacturing jobs and close several factories over the next three years to revive its sagging North American auto operations.
But many Wall Street analysts offered only a tepid response to the plans, saying they were vague and did not go far enough to address a key problem: a lackluster lineup of cars that continues to lose sales to the offerings of Asian carmakers.
"These plans are not surprising given [GM's] market share losses and efficiency gains," said Goldman Sachs analyst Robert Barry. "If market share continues to fall over time, as we expect, then GM is really just treading water with such actions, not boosting profitability."
GM's problems underscore the dramatic slide of a company that has held the title of the world's largest automaker since 1931 but has struggled for decades in the U.S. Rival Toyota Motors Corp. is poised to overtake GM as the biggest global automaker within a few years. Toyota's rise has been so swift that its total stock market value is now about seven times GM's.
The job cuts outlined by Rick Wagoner, GM's chief executive, would slash the Detroit-based giant's hourly employment in the U.S. by 23%. At the end of last year, the company had 111,000 hourly workers and 39,000 salaried workers in the U.S., plus 31,000 in Canada and Mexico.
Wagoner, under fire for the company's worst quarterly loss in a decade, unveiled the cutbacks at GM's annual meeting in Wilmington, Del., which marked his first public appearance in months.
He identified four steps to turn the company around: improve vehicle designs, bolster marketing, streamline operations and continue to cut costs.
"Our absolute top priority is to get our largest business unit back to profitability as soon as possible," he said.
The job cuts and plant closures would save about $2.5 billion annually. But GM, which lost $1.1 billion in the first quarter, has seen its vehicle sales drop 6.7% this year as it continues to lose business to import brands.
Wagoner acknowledged that cutting employment and plant costs wouldn't cure GM's biggest problem: persuading more consumers to buy its cars and trucks.
Although GM still has about $20 billion in cash, enough to buy it more time, Wagoner failed to satisfy some shareholders. He heard from unhappy investors during the two-hour, 20-minute annual meeting.
Dissident shareholder Jim Dollinger, a Buick salesman in Flint, Mich., called for Wagoner's resignation. "We're going broke. It's time for a change," Dollinger said in an interview.
Almost 200 shareholders attended the meeting, twice the usual number, and some speakers criticized Wagoner and the GM board. However, none of the proposals offered at the meeting by dissident investors won the approval of shareholders.
"No one's job security is forever, and that applies to me," Wagoner said. "But I'm very confident we have the right plans and I have the full support of the board and frankly the full support of the key constituents in our company."
A big challenge for GM is to cut its soaring healthcare expenses -- $5.6 billion this year -- for its 1.1 million current and former workers and their families. Healthcare bills add about $1,500 to the cost of each GM vehicle, "a significant disadvantage versus our foreign-based competition," Wagoner said. Some analysts estimate that Toyota's U.S. healthcare expenses add about $300 to the cost of each vehicle.
Hoping to get workers to pick up a larger share of medical bills, GM is in intense talks with the United Auto Workers to reopen a contract that runs until 2007. "We have not reached an agreement at this time, and to be honest, I'm not 100% sure that we will," Wagoner said.
He vowed, however, that with or without union agreement, GM is "committed to a prompt, significant reduction" of its healthcare costs.
"The UAW is not convinced GM can simply shrink its way out of its current problems," said Richard Shoemaker, director of the union's GM department. "The way to get there is by offering the right product mix of vehicles with world-class design and quality."
Wagoner's speech "was more than I expected to hear at an annual meeting, but still not enough," said David Healy, auto industry analyst for Burnham Securities. He showed a "velvet fist" to the union by leaving open the possibility of a unilateral action if the UAW won't agree to health plan changes, Healy said.
Meanwhile, Los Angeles billionaire Kirk Kerkorian's offer to purchase 28 million additional GM shares for about $870 million expired Tuesday. His investment company, Tracinda Corp., said the results of the offer would be announced today.
If Kerkorian succeeded in acquiring all the shares he offered to purchase, he would own about 8.8% of GM. The company's share price had fallen to a 13-year low before he made his offer.
Kerkorian, who a decade ago made an unsuccessful bid to take over the former Chrysler Corp., did not attend the GM shareholder meeting.