General Motors cost-cutting measures reveals job losses

General Motors (GM) has been hit by the sub-prime mortgage crisis and falling US sales and, as a result, has offered a new buyout to all 74,000 of its unionised workers.

The giant carmaker said it will offer early retirement to 74,000 of its 110,000 US workers as it posted a net loss of $38.7 billion (£19.8 billion) for 2007. If each offer is accepted, the company faces a payout of $4.6 billion.

It is unknown how many workers are expected to accept the offer, however, it is believed that GM is hoping to persuade more workers to leave so that they can replace up to 16,000 non-assembly line workers with new employees earning half as much money, as permitted by 2-tier wage provisions in the 4-year contracts that they signed with the union last year.

Fritz Henderson, GM’s chief financial officer, said that the manufacturer expected to start seeing some savings from this proposal in the second half of 2008.

Mr Henderson said the fourth quarter in America was tough. Volumes were down and there was tougher pricing because we had a full incentive load for our pick-ups.

Last year’s $38.7 billion loss ($722 million in the fourth quarter) compares with a $2.2 billion profit in 2006.

The company also posted a one-off non-cash charge of $38.3 billion in the third quarter relating to the valuation of deferred tax assets.

The company concluded that it expects to start delivering an improvement in the performance of automotive operations this year.

GM managed to retain its crown last year as world’s top carmaker, keeping its Japanese rival Toyota at bay. However, Toyota’s sales growth outperformed GM’s, rising 6%.

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