Massive Auto Layoffs Coming

General Motors will announce “important changes” to its automotive operations Friday when the automaker releases its third-quarter financial results, according to a Detroit News report.

According to an internal company e-mail sent to company executives Monday and obtained by the newspaper, GM’s CEO Rick Wagoner and President and Chief Operating Officer Fritz Henderson will announce the changes to employees at 11 a.m. ET Friday. The changes will address challenges “brought on by the volatile global economic situation,” the newspaper said.

“Clearly given the challenges the industry is facing, we’re probably going to have to make additional adjustments,” the newspaper quoted GM spokesman Tom Wilkinson as saying. “It’s a very challenging time right now.”

News of the announcement comes as the Center for Automotive Research, a nonprofit organization, published a report Wednesday estimating that about 2.5 million jobs across the U.S. economy would be lost in the first year if the U.S. auto industry shrinks by 50 percent.

Only 239,000 of those job losses would be at the “Big Three” U.S. automakers. The remainder of the job losses would be at parts suppliers and other related industries, the Ann Arbor, Michigan-based center said.

Meanwhile, a top official at Cerberus Capital Management, the private equity company that owns most of U.S. automaker Chrysler, said Wednesday that the United States needs an economic stimulus package and must make sure the auto industry doesn’t fail.

John Snow said that president-elect Barack Obama and his new treasury secretary need a bipartisan plan to counter the worst economic downturn in about 50 years.

“What we need is to make sure that a vital industry like autos ... which is such a big part of the overall economy, doesn’t lead us into a deeper and harsher downturn,” Snow said in an interview on CNBC. “The collapse of the auto industry at this time would be devastating for a new president.”

GM and Chrysler have been holding talks to combine their operations in order to survive a punishing economic climate, sliding auto sales and a lack of access to credit for many consumers.

GM is burning through more than $1 billion per month and analysts have said the company could reach the minimum cash levels required to operate sometime next year. They say Chrysler could go into bankruptcy next year if it doesn't take on a partner or isn't acquired by another automaker, raising the specter of tens of thousands of lost jobs or the need for the government to take over the company's pension obligations.

GM, meanwhile, has been lobbying the Bush administration for at least $10 billion to help the company maintain its operations and finance a deal with Chrysler. GM could use some of the funding to shut down redundant Chrysler operations.

On Wednesday, the auto financing arm of GM, GMAC Financial Services, said its third-quarter loss widened to $2.52 billion.

GMAC is 51 percent owned by private equity firm Cerberus, while Detroit-based GM holds the rest.

GMAC has said it is having discussions with U.S. federal regulators about becoming a bank holding company, a move that could help it access government funding and be part of a potential acquisition of Chrysler.

Obama has said that he would quickly meet with the leaders of the U.S. automakers and the United Auto Workers union, a sign that he could exert influence on the process during the presidential transition.

GM and its allies in Congress have urged the Energy Department to expedite $25 billion in loans to help the industry retool assembly plants to build fuel-efficient vehicles. GM could access a portion of the funding. Lawmakers also are considering doubling the loan funding and reviewing other options to help the industry.

GM, in a statement issued Wednesday, said it welcomes Obama’s pledge to support the domestic auto industry and efforts to develop new technology.

“This support comes at an especially critical time as our industry confronts one of the most difficult economic periods in our nation’s history, caused by the global financial crisis,” the statement said. “This support will enable a competitive U.S. industry to contribute significantly to our nation’s economic revival.”

A GM-Chrysler deal could lead to job cuts of 24,000 to 35,000, according to industry analysts. They have predicted GM could close half of Chrysler’s 14 manufacturing plants and consolidate engineering, design, finance and other operations. Another 50,000 auto supplier jobs could also be lost.

Most of the losses would be in Michigan, but analysts say the alternative of Chrysler being sold in pieces would result in many more job cuts than a GM acquisition.

Source - MSNBC