General Motors Co said on Tuesday it will invest about USD 2 billion in 17 US plants, including a facility here that makes transmissions for small cars, as the automaker shifts from recovery mode to investing in future products.
GM said the plans will create or preserve more than 4,000 jobs as it retools the plants in eight states. The company employs 202,000 people globally, including 77,000 in the United States.
"We are doing this because we are confident about demand for our vehicles and the economy," GM Chief Executive Daniel Akerson said.
Investors and analysts have speculated on GM's plans for its growing pile of cash as the company's liquidity has reached USD 36.5 billion. It earned USD 3.2 billion in the first quarter after posting net income of USD 4.7 billion for all of last year, its first full-year profit since 2004.
GM did not disclose the timeline for the investments or in what other facilities it would invest other than to say more announcements would be made "over the next few months."
Executives previously signalled GM's focus on building cars would only grow, as shown by last week's announcement to invest USD 131 million revamping the Bowling Green, Kentucky, factory for a new version of the iconic Chevrolet Corvette sports car. The Kentucky announcement is part of the USD 2 billion plan.
Another key issue as GM adds jobs is how many will yield so-called second-tier wages, which are about half those of veteran union-represented employees. The lower wages will be a sticking point as major US automakers face labor talks with the United Auto Workers this summer.
GM filed for bankruptcy in 2009 after the US housing downturn and a spike in gasoline prices the year before that caused consumers to turn away from its high-profit but fuel-hungry trucks and SUVs.
The US automaker emerged from bankruptcy 40 days later thanks to a USD 52 billion taxpayer-funded bailout and sold shares in an initial public offering last November. Since exiting bankruptcy, GM said it has invested USD 3.4 billion in its US plants, creating or retaining more than 9,000 jobs.
The new investment is not a surprise and by delaying the details of the specific plants affected GM maximizes the attention it will receive as it works to assure taxpayers that the bailout was money well-spent, said Mirko Mikelic, senior portfolio manager with Fifth Third Asset Management.
"They probably underinvested in some of these plants for the last few years," said Mikelic, whose firm has held GM bonds and preferred securities in the past and still follows the stock. "They were keeping a handle on their cash. For years, in terms of R&D, they've been behind particularly Toyota.
The US government still owns 32% of GM's common shares, and many investors see that as an overhang on the stock. Last month, sources said the Treasury could sell a significant portion of its GM shares by fall.
Toldedo plant
In Toledo, GM will invest USD 204 million and retain about 250 jobs so the plant can make a new eight-speed automatic transmission toward the end of 2012. Akerson did not specify for which vehicles the new transmission would be made.
The plant employs more than 1,600 people, including more than 1,450 hourly workers.
The plant makes transmissions for a number of vehicles, including GM's No 2 selling Chevrolet Cruze small car. It also makes transmissions for trucks, which have not sold as well as high gasoline prices have once again pushed American consumers to more fuel-efficient vehicles.
GM, which employs 49,000 hourly US employees, said any new hires would come in at the lower wages, as agreed under its deal with the union. However, some of the positions would be filled with existing employees on the higher wage scale.
"The UAW's goal has been to return all laid-off workers to active status and see the company begin hiring again," said Joe Ashton, UAW vice president for GM relations.
He added that GM will first hire back the 1,357 UAW workers currently on layoff before making new hires. He reiterated that should occur by September, when the labor deal expires.
The lower wages, introduced as part of concessions in labor talks with the automakers, have angered many rank and file UAW members. The top tier of UAW workers make about USD 28 per hour, enough to grant middle-class status.
The union has signaled it wants to share in the gains of the automakers, which are in a much better financial position than in 2007, when the last contract was signed.
The UAW has pointed to rising profits and a hefty USD 26.5 million compensation package for Ford Motor Co Chief Executive Officer Alan Mulally in 2010 as a sign of the automakers' reviving health and say they want a bigger share of profits going to rank-and-file workers.
GM shares were up 0.7% at USD 31.62 on Tuesday afternoon, compared with their IPO price last November of USD 33.
