GM » Topics » Accelerate Cost Reductions and Quality Improvements

This excerpt taken from the GM 10-K filed Mar 15, 2007.
Accelerate Cost Reductions and Quality Improvements
 
Following our November 2005 announcement of our strategy to reduce structural costs in the manufacturing area, GM has introduced a variety of initiatives to accomplish that strategy. In 2007, we expect to realize the $9 billion structural-cost savings target versus 2005 in our GMNA and Corporate and Other segments on a running rate basis. Running rate basis refers to the average annualized cost savings into the foreseeable future anticipated to result from cost savings actions when fully implemented. GM realized $6.8 billion in structural cost reductions in North America during 2006, exceeding the $4 billion of structural cost reductions estimated for 2006 in GM’s 2005 Annual Report on Form 10-K. This improvement is due largely to the success of the attrition programs, including the effect of the pension remeasurement. The expected total annual cash savings from structural cost reductions is approximately $5 billion on an average running rate basis. In addition, GM is focusing on our long-term goal of reducing our global automotive structural costs to 25% of global revenue. For 2006, global automotive structural costs were less than 30% of revenue, down from about 35% in 2005.
 
In November 2005, GM announced that it would cease operations at 12 manufacturing facilities by 2008, and reduce manufacturing employment levels by approximately 30,000 employees by the end of 2008. In fact, GM reached the reduced employment levels as of January 2, 2007. To support its structural cost initiatives, in March 2006 GM, the UAW, and Delphi entered into the UAW Attrition Agreement designed to reduce the number of hourly employees at GM and at Delphi through the UAW Attrition Program in which approximately 34,400 GM employees participated. Beginning in 2007, GMNA will benefit from the full year impact of the UAW Attrition Program since the remainder of the participants in the program either retired or otherwise left as of January 1, 2007. See “GM-UAW-Delphi Special Attrition Program Agreement” below for a further description of the UAW Attrition Agreement. GM believes these actions collectively will reduce our excess capacity by one million units, in addition to the one million unit capacity we eliminated between 2002 and 2005, and reduce structural costs to assist in closing the cost gap with other vehicle manufacturers. To achieve further cost reductions, GM’s management is putting a high priority on negotiating a more competitive collective bargaining agreement with the UAW in 2007.
 
In the first quarter of 2006, GM announced plans to substantially alter pension benefits for current U.S. salaried employees by freezing accrued benefits in the current plan and implementing a new benefit structure for future accruals, which include a reduced defined benefit plan for some salaried employees and a new defined contribution plan for the other salaried employees. These pension plan changes will not affect retirees or surviving spouses who are currently drawing benefits from the Salaried Retirement Program.
 
Reducing material costs remains a critical part of GMNA’s overall long-term cost reduction plans, although improved performance in purchasing has been offset by higher commodity prices for aluminum and copper and troubled supplier support. GM continues its aggressive pursuit of material cost reductions via improvements in its global processes for product development, which will enable further commonization and application of parts among vehicle architectures, as well as through the continued use of the most competitive supply sources globally and the extensive use of benchmarking and supplier footprint optimization. By leveraging its global reach to take advantage


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Turnaround Plan — (continued)
 
of economies of scale in purchasing, engineering, advertising, salaried employment levels, and indirect material costs, GM seeks to continue to achieve cost reductions. GM also anticipates that a resolution of the Delphi bankruptcy reorganization, discussed below, will include an opportunity for GM to mitigate the cost penalty it now pays Delphi for certain parts.
 
GM has seen significant improvements in both warranty and other quality related costs over the past several years, which has enabled the implementation of the extended powertrain warranty described above. In 2007, we will continue to focus on reducing these costs.
 
This excerpt taken from the GM 10-Q filed Nov 7, 2006.
Accelerate Cost Reductions and Quality Improvements
 
Following our November 2005 announcement of our strategy to reduce structural costs in the manufacturing area, GM has introduced a variety of initiatives to accomplish that strategy.
 
In November 2005, GM announced the cessation of operations at 12 manufacturing facilities by 2008, and a reduction in manufacturing employment levels of approximately 30,000 employees by the end of 2008. GM now expects to reach the reduced employment levels by January 1, 2007. To support the structural cost initiatives further, on March 22, 2006 GM, the UAW and Delphi announced they had entered into the UAW Attrition Agreement designed to reduce the number of hourly employees at GM and at Delphi through a special attrition program in which approximately 34,400 employees will participate. See the “GM-UAW-Delphi Special Attrition Program Agreement” section for a further description of the UAW Attrition Agreement. GM believes these actions collectively will reduce our excess capacity by 1 million units, in addition to the 1 million unit capacity we eliminated between 2002 and 2005, and reduce structural costs to assist in closing the cost gap with other vehicle manufacturers. To achieve further cost reductions, GM’s management is putting a high priority on negotiating a more competitive collective bargaining agreement with the UAW in 2007.
 
In the first quarter of 2006, GM announced plans to substantially alter pension benefits for current U.S. salaried employees by freezing accrued benefits in the current plan and implementing a new benefit structure for future accruals, which will include a reduced defined benefit plan for some salaried employees and a new defined contribution plan for the other salaried employees. These pension plan changes will not affect retirees or surviving spouses who are currently drawing benefits from the Salaried Retirement Program.
 
On October 3, 2006, the GM Board of Directors approved a reduction to the level of coverage for corporate-paid salaried retiree life insurance. For eligible salaried employees who retire on or after May 1, 2007, coverage will reduce 50% 10 years from the date of retirement; salaried retirees before May 1, 2007 will have their coverage reduced 50% on January 1, 2017. This change is anticipated to reduce GM’s year-end OPEB obligation by approximately $0.6 billion.
 
In addition to the structural cost reductions, GMNA was also targeting a net reduction in material costs in 2006 of $1 billion, prior to factoring in the cost of government mandated product improvements. Reducing material costs remains a critical part of GMNA’s overall long-term cost reduction plans. Attainment of this target, however, has been challenged by higher commodity prices and troubled supplier situations. GM continues its aggressive pursuit of material cost reduction via improvements in its global processes for product development, which will enable


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This excerpt taken from the GM 10-Q filed Aug 8, 2006.
Accelerate Cost Reductions and Quality Improvements
 
Following our November 2005 announcement of our strategy to reduce structural costs in the manufacturing area, GM has introduced a variety of initiatives to accomplish that strategy.
 
In November 2005, GM announced the cessation of operations at 12 manufacturing facilities by 2008, and a reduction in manufacturing employment levels of approximately 30,000 employees by the end of 2008. GM now expects to reach the reduced employment levels by January 1, 2007. To support the structural cost initiatives further, on March 22, 2006 GM, the UAW and Delphi announced they had entered into the UAW Attrition Agreement designed to reduce the number of hourly employees of GM and of the Delphi through a special attrition program in which approximately 34,400 employees will participate. See the “GM-UAW-Delphi Special Attrition Program Agreement” section for a further description of the UAW Attrition Agreement. GM believes these actions collectively will reduce our excess capacity by one million units, in addition to the one million unit capacity we eliminated between 2002 and 2005, and by reducing structural costs to assist in closing the cost gap with other vehicle manufacturers. To achieve further cost reductions, GM’s management is putting a high priority on negotiating a more competitive collective bargaining agreement with the UAW in 2007.
 
In the first quarter of 2006, GM announced plans to substantially alter pension benefits for current U.S. salaried employees by freezing accrued benefits in the current plan and implementing a new benefit structure for future accruals, which will include a reduced defined benefit plan for some salaried employees and a new defined contribution plan for the other salaried employees. These pension plan changes will not affect retirees or surviving spouses who are currently drawing benefits from the Salaried Retirement Program.
 
In addition to the structural cost reductions, GMNA was also targeting a net reduction in material costs in 2006 of $1.0 billion, prior to factoring in the cost of government mandated product improvements. Reducing material costs remains a critical part of GMNA’s overall long-term cost reduction plans. Attainment of this target, however, has been challenged by higher commodity prices and troubled supplier situations. GMNA will continue its aggressive pursuit of material cost reduction via improvements in its global processes for product development, which will enable further part commonization and reuse among architectures, as well as through the continued use of the most competitive supply sources globally.
 
GMNA is also seeking cost efficiencies in most other areas of the business including engineering, advertising, salaried employments levels, and indirect material costs. Engineering will seek to reduce development costs through the use of common vehicle architectures that can be used on a global basis. Advertising will seek more efficient and focused spending in line with brand focus.


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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

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