GM Prepares for Involuntary Layoffs of Workers

General Motors is taking actions throughout its global operations to conserve cash, including involuntary layoffs and the suspension of benefits such as matching payments into 401(k) stock savings plan starting Nov.1, according to Dow Jones Newswires and Reuters.

The changes, which are expected to eventually include more changes to salaried employee benefits, come as North American and Western European markets have contracted severely, according to the report, which cited a letter written to executives at the company.

GM had previously announced steps to cut its costs, and said more workers than it expected took buyouts under that program, the report said.

The automaker had hoped to reduce its salaried work force by 15 percent, or 5,000 workers, under a buyout and retirement incentive program. Now, more workers then expected are opting for the program.

The extent of the automaker's problems will become clearer when it announces its third-quarter results and October sales figures.

GM spokesman Tom Wilkinson told Reuters the company could reinstate matching payments into the 401K program if business conditions improve. The latest cost-cutting steps come at a time when the No. 1 U.S. automaker's sales are tumbling and its ability to survive the downturn has come under scrutiny.

GM, which has lost $51 billion over the past three years, said in July that it would raise $15 billion in liquidity through 2009 through a series of steps, including a 15 percent reduction of salaried workers in North America.

Sources familiar with the situation have said GM is in talks to acquire its Chrysler, in part to gain access to cash on the smaller rival's balance sheet that totaled $11.7 billion as of the end of June.

Chrysler President Jim Press said Wednesday the automaker's steadier cash flow might be a reason for suitors to be considering its assets, but declined to directly address whether the automaker was in merger talks with GM.

GM burns through $1 billion in cash each month and is saddled with a cash-draining surplus of workers and plants. GM said it did not have a final tally for its salaried workers who have taken early retirement and buyout packages.

It declined to comment on whether it would need involuntary layoffs to meet the target for workforce reductions. GM's U.S. sales through September were down 18 percent from a year earlier, hit by tightening credit, a slowing economy and a housing market slump. Shares of GM were off 8 cents at $6.11 on the New York Stock Exchange.

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