GM to lay off 3,550 due to poor sales

The company announced Monday that it plans to cut one shift each at pickup truck and large sport utility vehicle plants in Flint and Pontiac, Michigan; Janesville, Wisconsin; and Oshawa, Ontario, resulting in about 3,550 layoffs.

The world's largest automaker by sales said the cuts, to take effect this summer, were brought on by weak demand due to high gasoline prices and an economic downturn.

GM said it will make about 88,000 fewer pickups and 50,000 fewer big sport utility vehicles this calendar year because of the cuts. The layoffs represent just over 4 percent of GMs hourly manufacturing work force of about 80,000 in North America.

The announcement came after stock markets closed. GM shares rose 56 cents, or 2.6 percent, to $21.94 Monday, then lost 3 cents in after-hours trading.

"With rising fuel prices, a softening economy and a downward trend on current and future market demand for full-size trucks, a significant adjustment was needed to align our production with market realities," GM North America President Troy Clarke said in a statement.

For about the past three years, the U.S. auto market has been shifting from pickup trucks and SUVs to cars and crossover vehicles, but the trend picked up in recent months due to gas prices that have reached $3.60 (2.30) per gallon, on average.

GM expects the layoffs to begin July 14 at the Flint, Janesville and Pontiac plants, and Sept. 8 at Oshawa. Most of the factories had already seen layoffs and production cuts due to a parts shortage from a two-month strike at American Axle and Manufacturing Holdings Inc.

GM spokesman Tony Sapienza said the company will eliminate shifts with 750 workers each at Flint and Janesville, 1,150 workers in Pontiac, and 900 workers in Oshawa. Final numbers must be worked out with unions, he said.

Laid-off workers will get unemployment benefits and supplemental pay that total 80 percent of their normal 40-hour gross pay, said GM spokesman Dan Flores.

Greg Gardner, an analyst with the Oliver Wyman Group, said the cuts look like "a realistic assessment." "The full-size pickup and SUV market is not going to rebound anytime soon," he said. "It looks like that they dont plan on making up very much of the production loss due to the American Axle strike."

Gardner said GM's announcement reflects the industrys overall production forecast this year, down to about 15 million light vehicles from an earlier forecast of 15.5 million.

The Flint, Pontiac and Oshawa plants make the Chevrolet Silverado and GMC Sierra pickups, while Janesville manufactures the Chevrolet Tahoe and Suburban and GMC Yukon big SUVs.

GM said it did not forecast how many of those vehicles it expected to make this year, but it sold about 1.1 million of them in the U.S. last year, according to Autodata Corp.

GM said pickup sales overall are down 15 percent through March, while sales of large SUVs are off 26 percent.
Jesse Toprak, chief industry analyst for the auto information site Edmunds.com, said GM has a 92-day average supply of large trucks. A 60-day supply is considered optimal in the business.

Toprak said the automaker will lose about $4.4 billion (2.82 billion) in gross sales because of the production cuts, but its nearly impossible to determine the impact on GMs net profits.

The production cuts should help GM keep its inventory under control, said Catherine Madden, an analyst with the consulting firm Global Insight.

The cuts come as 74,000 U.S. workers represented by the United Auto Workers face a May 22 deadline to decide on GMs latest round of buyout and early retirement offers.