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GM Chief Says Plan Will Save $4 Billion

January 14, 2006|From Associated Press

DETROIT — General Motors Corp. expects to save about $4 billion this year as it implements its North American turnaround plan, Chairman and Chief Executive Rick Wagoner said Friday. But he declined to give earnings guidance, saying there were too many outstanding issues facing the company.

Wagoner also refused to speculate on whether the board of the world's biggest automaker would consider cutting dividends to shareholders. Jerome York, an aide to billionaire investor Kirk Kerkorian, said this week that GM should consider halving its annual $2-a-share dividend, which York estimated would save $566 million a year.

"We have a lot of topics under our corporate governance structure that require board approval," Wagoner told a gathering of automotive analysts.

He said GM's financial picture would be affected by the outcome of negotiations with Delphi Corp., its former parts division, which has filed for bankruptcy protection and could seek billions from GM. GM also is trying to sell a controlling stake in its finance division, GMAC.

Wagoner said it was unclear when the automaker would see the full benefit of a new agreement that requires retired autoworkers to pay more for healthcare. The agreement has received preliminary approval in federal court, and GM hopes it will go into effect April 1.

Wagoner said GM was working to implement its plan to reduce structural costs -- which include healthcare and pensions -- by $6 billion a year and reduce material costs by $1 billion.

GM plans to achieve some savings by reducing its salaried staff by 6% to 7% this year, Wagoner said. The company has cut its salaried workforce by a third since 2000, he said. In November, the automaker announced a plan to cut 30,000 hourly jobs and close 12 facilities by 2008.

GM's U.S. sales fell 4% in 2005, and it lost $4.8 billion in its North American operations in the first nine months of 2005.

Wagoner said GM was optimistic about its decision to lower prices on virtually all its vehicles in the U.S. market, adding that the company was determined not to pile on incentives if the strategy didn't show immediate results.

GM shares fell 59 cents to $20.37 on Friday.

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