GM Announces More Layoffs,Production Cuts Amid Falling Demand

General Motors Corp. (GM) on Monday said it will lay off 2,000 more workers this spring and schedule down time at most of its assembly plants in the face of declining sales.

The downsizing is needed even though GM virtually halted production this month and slashed output by 20% in 2008.

GM this spring plans to cut shift at a small-car factory in Ohio and a plant in Michigan that makes crossovers including the GMC Acadia and Buick Enclave, a company spokeswoman said. About 800 workers will be laid off in Ohio and 1,200 in Michigan. Additionally, GM is planning to idle 14 of its 24 North American assembly plans for a week or more in the second and third quarter.

GM and other auto makers are struggling to match production with slumping, gyrating demand for vehicles. The U.S. auto market last year sank to per-capita lows unseen since World War II and the decline is expected to continue in 2009.

Meantime, wildly fluctuating fuel prices have led to flip-flopping tastes among consumers. Last summer when gas was $4 per gallon, fuel efficient cars were in short supply. Now, with gas closer to $2 per gallon, buyers are looking for bigger trucks and sport-utility vehicles.

Among the cuts announced Monday is the elimination of one of two shifts at GM's small-car factory in Lordstown, Ohio. The factory was running on three shifts and overtime just a few months ago as GM raced to meet demand for small cars.

"It just shows how huge the uncertainty is in the market and how bad the market is," Morningstar Inc. analyst David Whiston said. "You have to have production meet demand and there is no sense to put more inventory out there and then go beg your dealers to take more cars. The old model has been to overproduce and then throw a lot of incentives in the market, but that just kills your residual values."

GM, surviving on a $13.4 billion federal loan, must convince the government by March 31 it can become viable or risk losing the money. Production cuts will be a significant part of GM's recovery plan.

The auto maker's U.S. sales fell 23% last year while the overall market sank 18%.

-By Sharon Terlep, Dow Jones Newswires; 248-204-5532; [e-mail]

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