GM cuts include Lordstown plant production Cobalt production takes a hit in wake of GM report

By Don Shilling

Automaker says it’s unsure whether it will have enough cash to get through 2009.

General Motors is hitting the brakes on Chevrolet Cobalt production and laying off 1,100 local workers.

GM said Friday it needs fewer cars from its Lordstown complex, a sharp turn from this summer when it added a third shift at the plant.

It was a chilling day for GM, which enacted wide-ranging cuts and admitted the possibility that it wouldn’t have the cash to fund its operations next year. After announcing Monday that its October sales were down 45 percent, GM said Friday that it lost $2.5 billion in the third quarter and burned through $6.9 billion in its cash reserves.

But at least the Mahoning Valley knows were it stands after weeks of speculation about Lordstown.

The complex’s third shift — which was rumored to be eliminated — will stay, and the new Chevrolet Cruze will be launched on schedule in 2010. Reports had said the replacement for the Cobalt was going to be pushed back a year.

The layoffs will come Jan. 20, when 1,060 hourly workers and about 50 salaried workers will be furloughed indefinitely. The complex employs about 4,600.

“It is tragic,” said U.S. Rep. Tim Ryan of Niles, D-17th, who added that the news is especially hard for families preparing for the holidays.

The news dims one of the local economy’s bright spots of the past year.

GM added a third shift at the complex in August because demand for the fuel-efficient, Lordstown-built Cobalt was expected to boom. About 1,400 workers were added to staff the third shift and replace 550 workers who took buyout offers last summer.

But then gas prices fell, credit markets collapsed and stock prices dropped. Cobalt sales fell 60 percent in October amid an overall decline in the industry.

“We are adjusting production to align ourselves with a shrinking market,” said Chris Lee, a GM spokesman.

He wouldn’t speculate on how long the layoffs will last. It all depends on how quickly sales bounce back.

Laid-off hourly workers will receive state unemployment benefits and supplemental benefits that provide 85 percent of pay for 48 weeks. Workers who have less than a year on the job aren’t eligible for the supplemental benefits that are part of the United Auto Workers contract.

Lee said workers with the least seniority will be laid off first, but he wasn’t sure how that affected workers who transferred to Lordstown from other GM plants and from Delphi Corp.

UAW officials could not be reached for comment.

With fewer workers on the three shifts, GM will cut the speed of the assembly line in Lordstown. Instead of making 1,500 cars a day, it will produce 1,100.

To prepare for reduction in speed, the Lordstown complex will be closed the week of Jan. 12.

The slowdown could affect several area plants that supply parts to the Lordstown complex.

Lordstown is one of 10 plants where GM announced line speed reductions and layoffs. About 3,600 workers are being laid off in January and February.

Ray Young, GM’s chief financial officer, said on a conference call with analysts and the media that by the end of the year, GM will approach the point where it doesn’t have enough cash to fund daily operations. Analysts have said that GM needs between $11 billion and $14 billion in cash on hand, and GM said it had $16.2 billion in cash Sept. 30.

Young added GM will fall short of its cash needs in the first half of 2009 unless car sales rebound, it sells some assets or receives private or public financing. The auto industry has been pushing for large loans from the federal government.

Rick Wagoner, GM chairman and chief executive, said executives are taking “every action” to avoid filing for bankruptcy because of the dire consequences that would have on the company and its suppliers.

GM announced plans to save $5 billion next year, in addition to the $15 billion in cost-cutting steps announced in July. The new steps include delaying much of the company’s new product development, although officials said the Cruze and Chevrolet Volt electric car would stay on schedule.

Other steps include reducing the company’s salaried work force and suspending some benefits, including the company’s match for 401(k) plans and tuition reimbursement.

GM said it would cut a total of 7,000 salaried jobs, up from 5,100 it announced in July.

GM had 32,000 U.S. salaried workers at the end of last year, down from 44,000 in 2000.

Wagoner said GM was suspending merger talks with Chrysler so that it could focus on improving its financial condition.

Ryan and U.S. Rep. Jason Altmire of McCandless, Pa., D-4th, said they can foresee a need for some form of federal government assistance to the auto industry, but assistance that must be carefully directed and spent.“There has to be a fundamental change in the business model,” Altmire said.

, adding that the government just can’t throw money at the problem. The auto companies need a business model designed to compete on the world market, he said.

Ryan said there may be some “natural corrections” to any faulty business plans, and those should be allowed to happen.

Any money the federal government allocates to the industry should be used for the design and production of alternative-energy vehicles that can be marketed both at home and abroad, he said.

shilling@vindy.com