AP Source: GM Could Announce Production Cuts Soon

By: AP
By: AP

DETROIT - General Motors Corp. is likely to announce further production cuts and possible plant closures as early as next week as it deals with slumping sales and a collapse in its stock price, a person with knowledge of the company's plans said Friday.

The person, who did not want to be identified because the plans are not finalized, said the cuts likely will hit engine, transmission and stamping operations to correspond with a June announcement that GM would close four truck and sport utility vehicle assembly plants.

The closure dates for those plants likely will be accelerated, the person said. GM announced last week that its Moraine, Ohio, SUV factory will close Dec. 23, and it has said it will idle assembly factories in Oshawa, Ontario; Toluca, Mexico; and Janesville, Wis., by 2010.

Chairman and CEO Rick Wagoner said last month that GM would have to make adjustments, particularly in stamping factories.

Further cuts could shore up GM's share price, which lost nearly half its value this week, plunging to the lowest level in more than 58 years. The shares fell 31 percent to $4.76 Thursday and dropped to $4 in the first minutes of trading Friday before rebounding to $4.99 by midday.

Industry analysts say closing factories or pulling off shifts will help GM cut costs and preserve cash at a critical time with the company losing billions and burning up cash at an alarming rate.

GM had $21 billion in cash and $5 billion available through credit lines at the end of June for total liquidity of $26 billion but has been burning up cash at a pace of more than $1 billion a month.

The company announced a plan in July that calls for cutting $10 billion in costs and raising another $5 billion through asset sales and borrowing through 2009.

Mark Warnsman, an auto analyst with Calyon Securities, said further production cuts are consistent with what GM and other automakers have been doing all year — cutting factory capacity to match lower sales.

"I think it's a positive sign that GM is biting the bullet," he said. "for GM going forward, they're going to have to use everything available to them."

The drop in GM's share price Thursday was fueled by a statement from Standard & Poor's Ratings Services, which said the "rapidly weakening state" of the global automotive market could push GM's credit further into junk status, making it even tougher to borrow money.

GM issued a statement Friday saying that while it faces "unprecedented challenges" related to the ongoing problems in the financial markets and weakening economies across the globe, it still doesn't consider bankruptcy protection as an option.

"Bankruptcy would not be in the interests of our employees, stockholders, suppliers or customers, and we believe speculation about a possible filing is exaggerated and unconstructive," GM said.


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