Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 5, 1991 TAG: 9102050126
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: DETROIT LENGTH: Medium
GM's board of directors cited the deepening slump in auto sales, now worsened by the impact of the Persian Gulf War.
The quarterly dividend - the portion of profits the company shares with its stockholders - was cut from 75 cents per common share to 40 cents. It was only the third time the nation's largest auto maker has taken such action, a spokesman said.
"Any reductions in dividends represents an extremely difficult decision in view of the great importance we place on the interest of our stockholders," said GM Chairman Robert C. Stempel in a statement released from New York.
GM stocks, with 2 million shareholders, are among the nation's most widely held.
Stempel, who said he wanted to trim management ranks when he took office in August, said the dividend cut was necessary to "protect the fundamental operating and financial strength of General Motors."
"This dividend reduction is an important recognition on the part of GM that its normal level of earnings is significantly lower than they previously thought it would be. You don't lightly cut the dividend," said Ron Glantz, analyst with Dean Witter Reynolds Inc. in San Francisco.
GM will cut its salaried work force of about 99,000 people by 15 percent by 1993, mostly through attrition and early retirement, GM spokesman Terrence Sullivan said.
"I hate to use the term lean and mean, but we really have to have it better balanced," Sullivan said.
Early retirement would be offered to salaried employees aged 53 to 61, Sullivan said. He did not know how many of the affected employees were in that age group.
GM, Ford Motor Co. and Chrysler Corp. are expected to report losses for the last three months of 1990. GM is expected to post about a $1.4 billion loss, compared with earnings of $700.2 million in the fourth quarter of 1989.
Ford's board decided last month to keep its dividend at 75 cents per share; Chrysler's board will consider its 30-cent dividend in March. The Big Three auto makers are to report their fourth-quarter and 1990 earnings later this month.
The board has cut GM's dividend twice before, in the first quarter of 1975 for 15 months, and in the second quarter of 1980 until the fourth quarter of 1983.
GM also plans to reduce capital spending by $500 million annually to about $7 billion during the next four years. However, engineering will remain unaffected and GM will maintain such programs as the nine new cars and six new trucks scheduled for release this year.
The board also announced that it will seek $2 billion worth of price reductions from suppliers during the next three years and will substantially trim overtime among its hourly workers.
by CNB