General Motors Corp. expects to save about $4 billion this year as it implements its North American turnaround plan, Chairman and CEO Rick Wagoner said Friday. But he declined to give earnings guidance, saying there are too many outstanding issues facing the struggling automaker.
Wagoner also refused to speculate on whether the board of the world’s biggest automaker will consider cutting dividends to shareholders. Earlier this week, Jerome York, an aide to billionaire investor Kirk Kerkorian, said GM should consider halving its annual $2 per share dividend, which he estimated would save $566 million a year.
"We have a lot of topics under our corporate governance structure that require board approval," Wagoner told a gathering of automotive analysts in Dearborn. GM stopped providing earnings guidance last April after it lost $1.1 billion in the first quarter.
Wagoner said GM’s financial picture will be affected by the outcome of negotiations with Delphi Corp., its former parts division, which has filed for bankruptcy protection and could seek billions from GM. GM also is trying to sell a controlling stake in its finance division, GMAC.
Wagoner also said it’s unclear when the automaker will see the full benefit of a new health care agreement that requires retired autoworkers to pay more for their health care. The agreement has received preliminary approval in federal court, and GM hopes it will go into effect April 1, Wagoner said.
Wagoner said the company is working to implement its previously announced plan to reduce structural costs - which include health care and pensions - by $6 billion a year by the end of 2006 and reduce material costs by $1 billion. Wagoner said GM’s structural costs as a percentage of revenue are now at 34 percent, and he would like that to fall to 25 percent by 2010. GM expects to realize $4 billion in savings this year as the initiatives are implemented.
GM plans to achieve some savings by reducing its salaried staff by 6 to 7 percent this year, Wagoner said. The company has cut its salaried work force by a third since 2000, he said. In November, the company announced a plan to cut 30,000 hourly jobs and close 12 facilities by 2008.
"Executing these numbers is critical to our success, and we are focused 100 percent on getting that done," Wagoner said.
The company’s U.S. sales fell 4 percent in 2005, and GM lost $4.8 billion in its North American operations in the first nine months of 2005. The company is scheduled to report fourth-quarter earnings Jan. 26.
"I think it’s safe to say that just about everyone at General Motors is happy to see 2005 behind us," Wagoner said.
"We certainly do have some flexibility to give the program some time to take hold," Wagoner said. "We absolutely plan to stick with the strategy. We think it’s a good strategy."