beware general motors effect, page-2

Agree....getting ugly.....

From Nightly Business Report :

11/21/05: GM Closes Plants & Drives Out Tens Of Thousands of Workers

SUSIE GHARIB: 30,000 layoffs and 12 plant closings. That`s the new road map announced by General Motors today. The massive restructuring is the automaker`s deepest round of cuts since 1991. But GM says the moves will add up to about $7 billion in savings by the end of next year and help return the company to profitability. Diane Eastabrook reports.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: The highly anticipated restructuring plan General Motors unveiled today will reduce its capacity by 40 percent and make it more competitive. Under the plan, GM will close plants and eliminate shifts at more than a dozen North American operations starting next year. As a result 30,000 jobs will be cut. Chairman and CEO Rick Wagoner called the restructuring tough, but needed.

RICHARD WAGONER, CHAIRMAN & CEO, GM: The decisions we are announcing today were very difficult to reach because of their impact on our employees and the communities where we live and work. But these actions are necessary for General Motors to get its cost in line with our major global competitors.

EASTABROOK: Industry watchers applauded the plan.

SCOTT SPRINZEN, AUTO ANALYST, STANDARD & POOR`S: They`re taking some steps which ultimately could help them to turn things around, but there are a lot of uncertainties too.

EASTABROOK: Analysts say the biggest uncertainty is approval from the United Auto Workers and the union appears ready for a fight. In a statement the UAW said quote, workers represented by today`s action are protected by our job security program, as well as other provisions and protections of the UAW/GM national agreement. The UAW will do everything in its power to enforce those programs, end quote. Another uncertainty is how much the restructuring will cost.

JOHN NOVAK, AUTO ANALYST, MORNINGSTAR: They`re in the process of quantifying that now. It`s likely to include non-cash items, cash items. So we`re looking for a big charge probably in the first quarter of 2006.

EASTABROOK: While Novak says the restructuring does go a long way in reducing GM`s costs, he says it does nothing to address the company`s other problems. The automaker still faces an SEC investigation into its accounting practices as well as pension and benefit liabilities at its now bankrupt spin-off Delphi Corporation. He says GM also lacks the kinds of products consumers are now buying.

NOVAK: They don`t have strong cars to fight the Camry and the Accord and some of Toyota`s and Honda`s hybrids, so really there`s a whole host of open questions on the product side and you have to wonder where the sales growth is going to come from in the future.

EASTABROOK: Still, analysts say if GM can get its cost structure in line, it can spend more time focusing on the products that will drive sales down the road. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.