Workers fret as Ford, GM cuts expected on Friday | autos | Hindustan Times
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Workers fret as Ford, GM cuts expected on Friday

General Motors Corp and Ford Motor Co factories across North America are set to face worry time once again as their employers poised to announce billions more in losses and further job cuts on Friday.

autos Updated: Nov 07, 2008 10:51 IST

With their employers poised to announce billions more in losses and further job cuts on Friday, it's worry time once again at General Motors Corp and Ford Motor Co factories across North America.

Both companies are spending billions more than they're making amid the worst economic crisis in decades.

Both companies say that factory production needs to reflect declining sales, which means job cuts.

According to Ford's top sales analyst and two people briefed on GM's plans, neither automaker is planning to announce factory closures, although they are likely to cut production by eliminating shifts, overtime bans or temporary plant shutdowns. The people did not want to be identified because GM's plans are confidential. GM also is expected to slow its product development schedule, delaying some models and engines at least for a short time. Both automakers, though, are expected to report huge losses when they release third-quarter results on Friday morning, a day after their CEOs traveled to Washington to make the case for federal aid for the industry.

"I haven't heard nothing specific, but we are worried," said James Kendall, president of UAW Local 23, which represents workers at GM's parts stamping factory in Indianapolis. "Absolutely, we're worried. Who knows what's going to happen?"

Kendall's concerns were echoed at Ford and GM factories elsewhere as workers braced for cuts and waited to learn if the government will toss their companies a lifeline.

Industry analysts say Ford and GM likely are spending around $1 billion per month above their revenue. With credit markets frozen and junk credit ratings, both have had difficulty borrowing more money, raising the prospect that they could run short of cash. Barclays Capital analyst Brian Johnson on Thursday estimated that GM burned through $4.2 billion of cash in the third quarter and will end 2008 with $15.9 billion.

With no sales improvement expected next year and without government aid, Johnson expects GM's cash balance to fall to $5 billion next year, "below the company's $14 billion minimum working cash needs."

Johnson estimated that Ford burned $2.3 billion of cash last quarter and will end 2008 with $20.1 billion, but unlike GM, it will get through 2009 without reaching the minimum required to run the company. With no sales improvement next year, Johnson expects Ford's cash balance to remain above the $10 billion minimum, he wrote in a note to investors.

GM sales were down 45 per cent in October and 20 per cent through the first nine months of the year, according to Autodata Corp, while Ford sales were off 30 per cent last month and 19 per cent through October. Overall, October US sales were down 32 percent, and October's seasonally adjusted annual sales rate was the worst in 25 years.

Automakers blame tight credit markets and shaken consumer confidence.

Things are so bad that top executives from GM, Ford and Chrysler LLC, as well as the United Auto Workers union, traveled to Washington Thursday to seek additional federal aid to help them survive.

House Speaker Nancy Pelosi met with the chief executives of Detroit's automakers to hear their expected plea for an additional $25 billion in federal loans for future health care payments for retirees.

Pelosi told reporters at the start of the meeting that they would discuss "how we can work together to go forward to ensure the viability of that important industry, looking out for the taxpayer and looking out for the worker."

George Pipas, Ford's top sales analyst, said the company already has cut a lot of truck and sport utility vehicle production and will announce cuts at some car and crossover plants on Friday. "I'm not going to worry about things I can't control, but definitely I'm concerned," said Jeff Carter, vice president of a UAW local that represents 4,200 workers at a Ford truck, car and stamping complex in Wayne, Michigan, near Detroit. "If the banking industry doesn't loan the customers money, there will be nobody to sell products to no matter what you've got to offer." Ford shed 3,000 workers with another round of buyout and early retirement offers to factory workers mainly in Ohio and Michigan. The offers expired last week, but more cuts may be needed. Ford's top manufacturing executive told union officials in September that Ford has 4,200 more blue collar workers than it needs.

With the new cuts, Ford has shed around 41,000 hourly workers since 2006, mainly through early retirement and buyout offers. With the new cuts the company will have about 42,000 hourly workers in the U.S.

GM, which also has undergone a dramatic reduction of its factory work force with buyouts and early retirement offers, had about 125,000 U.S. hourly employees in 2003 and expects that to be 62,500 by the end of this year.

Workers at GM's parts stamping factories are particularly concerned. CEO Rick Wagoner said last month that the company will have to make more reductions at stamping operations. The company earlier this year announced the closure of four pickup truck and SUV plants, but has yet to fully make corresponding cuts in engine, transmission and stamping operations.

That makes UAW workers in Indianapolis worried about what's to come on Friday.

Workers, Kendall said, are "struggling to get by, like a lot of factories and locals are," Kendall said.

The 78-year-old factory recently has been producing more replacement parts, as opposed to components used in vehicle production, and that could make the plant more useful to the company, he said.

"I think it's profitable, what they get out of their service parts when they sell them," Kendall said.

While he was optimistic that President-elect Obama will provide some relief to the domestic auto industry when he takes office in January, Kendall said he knows that Obama's "plate is full." "I think the majority of us feel that our chances are better with our newly elected president," Kendall said. GM shares closed on Thursday at $4.80, down 76 cents or 13.7 per cent. Ford shares closed at $1.98, down 11 cents, or 5.3 per cent.

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