Fred O. Williams

Jul. 16, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- General Motors Corp. will tighten its belt in response to the industry's lean times, the automaker announced Tuesday, and Western New York will feel the pinch.

GM, buffeted by a U. S. sales slump and three years of losses, will suspend its dividend for the first time since 1922, cut the management payroll by 20 percent and sell assets to raise at least $15 billion in the next 18 months.

Eliminating the 25-cent quarterly dividend and an unspecified number of salaried jobs will help save $10 billion a year, GM executives said. GM plans to generate $4 billion to $7 billion by selling as yet unidentified assets -- perhaps including the Hummer brand -- borrowing from banks and paring benefits to retirees.

Cash bonuses for executives will be eliminated. The reductions in benefits and salaried head count will save about $1.5 billion in 2009, GM said.

GM has 40,000 salaried employees in North America.

Several thousand jobs will be cut through normal attrition and retirements, and through early retirement and buyout offers.

Chief Executive Rick Wagoner said the company has not made early retirement offers to salaried workers for three or four years, and he would expect good acceptance of new offers, helping GM to reach its cost-cutting goal.

The automaker will also delay $1.7 billion in payments to the union retiree health-care fund.

The spending reductions accelerate Wagoner's efforts to conserve cash and avert bankruptcy as a slowing economy and record gasoline prices push U. S. industry sales to a 15- year low.

The automaker has $24 billion in cash and access to $7 billion in credit, but has been burning through about $1 billion per month. JPMorgan (NYSE:JPM) analyst Himanshu Patel recently predicted that GM would go through $18 billion in cash this year and next.

The Tonawanda Engine Plant on River Road will see an undetermined cut in salaried jobs, which currently number 267, as part of the moves.

But the biggest impact of the cuts may be felt outside the plant. Health care coverage for salaried retirees over 65 -- the age for Medicare eligibility -- will be eliminated in 2009, GM said. People affected will get an increase in pension benefits from GM's (NYSE:GM) over-funded plan.

"I really hate to see salaried people lose their benefits, but that's the state of the economy," said Sal Morana, president of United Auto Workers Local 774 at Tonawanda, which represents hourly GM workers.

It's thought that the Buffalo region has a large share of GM retirees, although there's no official count. About 6,300 hourly and salaried workers have left jobs at area plants owned by GM and its successor companies since 2000.

GM's remaining area plant in the Town of Tonawanda was spared much of the squeeze announced Tuesday, officials said. The 1,390-job engine plant is already lean from previous cutbacks, having shrunk by about half since 2005. It is also relatively insulated from a steep plunge in truck sales.

"Here in this plant there's still a lot going on, a lot of positives," plant manager Steven C. Finch said. "It could be worse."

GM announced it will accelerate shutdown of four truck assembly plants in North America, but none of them uses engines produced in Tonawanda.

Meanwhile, plans to build a new diesel engine for pickup trucks at Tonawanda are still on track, Finch said. Although truck sales are down sharply, the diesel will offer improved mileage over gasoline-powered engines when it goes on sale next year.

GM shares rose on the news, up 46 cents to $9.84.

"What GM wants to make people understand is, we're still going to be around, fighting for market share," Finch said. The corporation plans celebrations surrounding its reaching the 100-year mark in September.

At Tonawanda, 367 hourly workers left their jobs by July 1 to take advantage of early retirement offers, Finch said. The plant recalled all 130 workers on layoff to replace some of the departures, and is filling about 60 temporary summer positions, he said.

Production levels are down for the plant's V-6 engine for sedans and its big 8- liter V-8 engine for commercial trucks, Finch said. However, demand for the plant's 2.4 liter four-cylinder engine for small cars is up, while the in-line four-cylinder for compact trucks is holding steady.

Bloomberg News and the Associated Press contributed to this report.

Newstex ID: KRTB-0019-26703137