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Everyone's going to feel the pain

In a major news conference today, General Motors (NYSE: GM) Chairman and CEO Rick Wagoner announced some huge cuts today in order to help position the company as a much leaner and competitive business going forward.

The end purpose of the strategy is to raise about $15 billion to help boost the North American operations of the company. The money will be raised through cutting costs, which would amount to about $10 billion, and then raise about $4 to $7 billion through loans or sales of assets.

Some of the more radical cuts include immediate suspension of dividends, dropping health-care coverage for white-collar retirees over 65 and reducing employee costs by about 20 percent. For dividends, it'll be the first time since 1922 it has been cut, and should save the company about $800 million through 2009.

Other cuts will include the usual attrition, buyouts and early retirement, among other methods.

According to Wagoner, the steep cuts needed to make this happen will help GM respond to the quickly changing market, where customers are responding to high costs of fuel by gravitating toward buying smaller cars.

"We are responding aggressively to the challenges of today's U.S. auto market," said Rick Wagoner. "We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix.  We remain committed to bringing to market great products that target changing consumer preferences for more fuel-efficient vehicles."

Projections for sales in the U.S for GM this year are at 14.7 million, a significant drop from three years ago, when the company sold 17 million vehicles.

Sales in June plunged by 18 percent, as poor economic conditions continued to slow growth.

By the end of 2009, the company added they'll reduce the number of trucks manufactured by 300,000; double the original target.

Wagoner tried to dispel worries about the company going bankrupt, saying the company has enough liquidity to reach its needs for 2008.

He added the measures announced today were preparations in case the U.S. downturn lasts longer than expected. He also said the new initiatives should bring the company enough cash to meet all the needs they'll have through 2009.

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